Scott Borger – Self-Selection and Liquidity Constraints in Different Migration Cost Regimes

Scott Borger – Self-Selection and Liquidity Constraints in Different Migration Cost Regimes
 

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As smuggling costs across the U.S.-Mexico border increased, a shift occurred in the types of migrants able to afford the costs. Potential unauthorized migrants face liquidity constraints meaning they cannot borrow in the formal sector against their future earnings to pay the cost for clandestine entry. In this paper I model the decision to migrate including this friction and the ability for U.S. social networks to alleviate these constraints. The model predicts (i) an increase in smuggling fees intensifies intermediate self-selection of migrants, (ii) an increase in US wages increases migration among higher skill types, and (iii) social networks enable lower skill types to migrate. The predictions of the model are tested by comparing migration behavior in low-cost and high-cost migration periods. I find evidence of a change in self-selection over time with an intensification of intermediate self-selection in the high-cost period relative to the low-cost period. Moreover, in the high-cost period, social networks increase the propensity to migrate of potential migrants with limited resources. In the model calibrated using U.S.-Mexico data, I find the smuggling fees are an important component of who migrates.

Scott Borger, Economist, Office of Immigration Statistics, U.S. Department of Homeland Security

Scott Borger is an Economist in the Office of Immigration Statistics in the U.S. Department of Homeland Security. He received his Ph.D. in Economics from UC San Diego in 2009 and was a graduate student researcher at CCIS from 2006-2009.