MIGRATION, SOCIAL NETWORKS, AND CREDIT: EMPIRICAL EVIDENCE FROM PERU

Sonia Laszlo and Eric Santor ()

The Developing Economies, 2009, vol. 47, issue 4, 383-409

Abstract: We seek evidence of the causal relationship between migration, social networks, and the probability of receiving credit in a developing country where credit markets are weak and internal migration is common. Migrants may face binding asymmetric information constraints as they often lack collateral. Social networks can help mitigate these constraints. Conversely, migrants might face higher liquidity constraints and might, therefore, demand more credit than nonmigrants. The effect of migration on participation in the credit market is thus ambiguous. Compounding this, migration and credit may be jointly determined. We utilize rich data from Peru to establish the net effect of migration on credit and the role that social networks play in this relationship.

Date: 2009
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