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The Impact of Liquidity Constraints and Imperfect Commitment on Migration Decisions of Offspring of Rural Households

Matthieu Delpierre

No 1011, Working Papers from University of Namur, Department of Economics

Abstract: This paper presents a non-cooperative model of intra-household decision-making regarding investment in migration. It is shown that the combination of liquidity constraints and imperfect commitment are a source of underinvestment in migration. More precisely, we highlight that, if remittances are unenforceable as a repayment for parent?s contribution in migration transaction costs, then both migrant and parent?s liquidity constraints, rather than households liquidity constraint as a whole, matter in determining the investment decision. Besides, the insurance motive for remittances is shown to generate divergence of interest over the characteristics of migration. This result calls for a theoretical approach that properly takes account of potential internalization problems, which the paper intends to offer. Plausibility checks of the model are provided by comparative statics whose outcomes are consistent with previous research on migration and remittances.

Pages: 29 pages
Date: 2010-10
New Economics Papers: this item is included in nep-dev and nep-mig
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http://www.fundp.ac.be/eco/economie/recherche/wpseries/wp/1011.pdf First version, 2010 (application/pdf)

Related works:
Journal Article: The impact of liquidity constraints and imperfect commitment on migration decisions of offspring of rural households (2012) Downloads
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