The Role of Marriage in Immigrants' Human Capital Investment Under Liquidity Constraints

23 Pages Posted: 28 Sep 2006

See all articles by Nava Kahana

Nava Kahana

Bar-Ilan University - Department of Economics; IZA Institute of Labor Economics

Sarit Cohen-Goldner

Bar-Ilan University - Department of Economics; IZA Institute of Labor Economics

Chemi Gotlibovski

Academic College of Tel-Aviv Yafo

Date Written: September 2006

Abstract

This paper presents a two-period human capital investment model of married and single immigrants under binding liquidity constraints, which explains alternative patterns in the host country's labor market. These patterns are also compared to those of natives who face a perfect capital market. By extending Eckstein and Weiss' model (2004) from the case of single immigrants with accessibility to a perfect capital market to the case of credit-constrained immigrant families, it is shown that the comparative advantage in investment that determines which spouse will invest more in local skills depends on his/her imported human capital growth rate rather than on its level. This comparative advantage can lead to full or partial specialization in work and investment activities within immigrant households. However, the level invested by each spouse is non-increasing with the level of the imported human capital of the spouse with the comparative advantage in investment, whereas it is nondecreasing with the level of imported human capital of the other spouse. A comparison of pre and post marriage investment indicates that the spouse with the comparative advantage in investment will increase his/her investment in human capital after his/her marriage, whereas the other spouse will decrease it. The more efficient investment due to marriage enables the achievement of a Pareto improvement.

Keywords: human capital investment, immigrants, marriage, binding liquidity constraints

JEL Classification: D10, J24, J61

Suggested Citation

Kahana, Nava and Cohen-Goldner, Sarit and Gotlibovski, Chemi, The Role of Marriage in Immigrants' Human Capital Investment Under Liquidity Constraints (September 2006). IZA Discussion Paper No. 2308, Available at SSRN: https://ssrn.com/abstract=933038

Nava Kahana (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel

IZA Institute of Labor Economics

Schaumburg-Lippe-Str. 7 / 9
Bonn, D-53072
Germany

Sarit Cohen-Goldner

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972 3 531 8948 (Phone)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Chemi Gotlibovski

Academic College of Tel-Aviv Yafo ( email )

Israel

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