Public Support for Private Efforts at Assimilation by Immigrants: The Role of Credit Constraints

21 Pages Posted: 1 Mar 2010

See all articles by Sajal Lahiri

Sajal Lahiri

Southern Illinois University Carbondale - Department of Economics

Date Written: February 28, 2010

Abstract

We examine the effect of borrowing constraint facing new immigrants on the process of their assimilation in the new society. We shall do so in a two-period model. In period one, immigrants invest, with some costs to them, in trying to assimilate. The probability of success in this endeavor depends on the amount invested and also on the level of the provision of a 'public' good paid for by lump-sum taxation of 'natives'. Those who succeed enjoy a higher level of productivity and therefore wages in period 2. The level of investment is endogenously determined. Assimilation also affect remittances by immigrants. Given this framework, we examine the effect of public support on the degree of assimilation and income repatriation. We do so under two scenarios regarding the credit market facing new immigrants. In the first, they can borrow as much as they want in period 1 at an exogenously given interest rate. In the second scenarios, there is a binding borrowing constraint. We compare the equilibrium under the two scenarios.

Keywords: Immigration, assimilation, credits, remittances

JEL Classification: I28, J61

Suggested Citation

Lahiri, Sajal, Public Support for Private Efforts at Assimilation by Immigrants: The Role of Credit Constraints (February 28, 2010). Available at SSRN: https://ssrn.com/abstract=1561363 or http://dx.doi.org/10.2139/ssrn.1561363

Sajal Lahiri (Contact Author)

Southern Illinois University Carbondale - Department of Economics ( email )

MC 415
1000 Faner Drive
Carbondale, IL 62901
United States

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