Protecting Home Abroad: Financial Rescues As Migration Prevention

• In Event: Domestic Politics of International Political Economy

Abstract

We argue and show that countries experiencing financial crises are more likely to receive bilateral bailouts when the crises could lead to migration flows that would be politically costly to creditors. Financial crises are usually accompanied by economic recessions that create outward migration pressures in crisis countries. Creditor country politicians are particularly worried about greater migration from crisis countries when immigration heightens economic, religious or cultural fears, causing social conflicts and political backlash. If potential creditors expect that a financial crisis would lead to increased immigration that could increase social conflicts, and thereby contribute to a political backlash, they use a variety of instruments to minimize migration. By providing additional liquidity to fill financing gaps through bilateral bailouts, crisis countries may be better able to avert the worst consequences of financial crises, thereby minimizing the migration pressures for the creditor government. We test our hypothesis using an original data set on bilateral bailouts by 36 OECD countries to 108 crisis countries in the year of the financial crisis between 1970 and 2010. Our statistical analysis supports our argument that as the potential for politically costly migration increases during financial crises so does the likelihood that the government provides a bilateral bailout. We support our statistical tests with qualitative evidence of U.S. bilateral bailout discussions for Mexico to trace the causal mechanisms of our argument.

Authors

• David Leblang, University of Virginia

• Christina J. Schneider, University of California, San Diego

• Jennifer L Tobin, Georgetown University