Migration and Cross-Border Financial Flows

31 Pages Posted: 23 Aug 2013

See all articles by Maurice Kugler

Maurice Kugler

Wilfrid Laurier University - School of Business & Economics; Harvard University - Center for International Development (CID); Centre for International Governance Innovation (CIGI); National Bureau of Economic Research (NBER)

Oren Levintal

Interdisciplinary Center (IDC) Herzliyah

Hillel Rapoport

Bar-Ilan University - Department of Economics; Stanford University

Abstract

The gravity model has provided a tractable empirical framework to account for bilateral flows not only of manufactured goods, as in the case of merchandise trade, but also of financial flows. In particular, recent literature has emphasized the role of information costs in preventing larger diversification of financial investments. This paper investigates the role of migration in alleviating information imperfections between home and host countries.We show that the impact of migration on financial flows is strongest where information problems are more acute (that is, for more informational sensitive investments and between more culturally distant countries) and for the type of migrants that are most able to enhance the flow of information, namely, skilled migrants. We interpret these differential effects as additional evidence pointing to the role of information in generating home-bias and as new evidence of the role of migration in reducing information frictions between countries.

Keywords: migration, international financial flows, international loans, gravity models, information asymmetries

JEL Classification: F21, F22, O1

Suggested Citation

Kugler, Maurice and Levintal, Oren and Rapoport, Hillel, Migration and Cross-Border Financial Flows. IZA Discussion Paper No. 7548, Available at SSRN: https://ssrn.com/abstract=2314843

Maurice Kugler (Contact Author)

Wilfrid Laurier University - School of Business & Economics ( email )

Waterloo, Ontario N2L 3C5
CANADA

Harvard University - Center for International Development (CID) ( email )

One Eliot Street Building
79 JFK Street
Cambridge, MA 02138
United States

Centre for International Governance Innovation (CIGI) ( email )

57 Erb Street West
Waterloo, Ontario N2L 6C2
Canada

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Oren Levintal

Interdisciplinary Center (IDC) Herzliyah ( email )

P.O. Box 167
Herzliya, 46150
Israel

Hillel Rapoport

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972 3 535 3180 (Fax)

Stanford University ( email )

Stanford, CA 94305
United States

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