Migration and Cross-Border Financial Flows

Maurice Kugler (1) , Oren Levintal (2) , Hillel Rapoport (3, 4)

1 IDC - Interdisciplinary Center Herzliya
2 Bar-Ilan University [Israël]
3 CES - Centre d'économie de la Sorbonne
4 PSE - Paris School of Economics

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, between culturally more distant countries, and when the source country of migrants is a developing country) and for the type of migrants that are most able to enhance the flow of information on their home country, 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.

Mots clés: gravity models; information asymmetries; international loans; international financial flows; Migration

Domaines: Economies et finances

Maurice Kugler, Oren Levintal, Hillel Rapoport. Migration and Cross-Border Financial Flows. 2015. ⟨halshs-01134465⟩