Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/90017 
Year of Publication: 
2013
Series/Report no.: 
IZA Discussion Papers No. 7548
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
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 and between more culturally distant countries) and for the type of migrants that are most able to enhance the flow of information, 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.
Subjects: 
migration
international financial flows
international loans
gravity models
information asymmetries
JEL: 
F21
F22
O1
Document Type: 
Working Paper

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