Working Paper: CEPR ID: DP1540
Authors: Francesco Daveri; Riccardo Faini
Abstract: As part of their effort to pool individual risk, households consider spreading their members over a plurality of locations, both inside and outside their country of origin. At the same time, the world is ridden with ?Chinatowns? and ?Little Italies?: people, whenever they move, tend to bunch in the same location. Bunching would appear fundamentally at odds with the desire to diversify risk. In this paper we provide a framework to reconcile both spatial bunching and the spread of migrants, combining risk-aversion and concavity of mobility costs at the household level. Evidence from Southern Italy is consistent with the main predictions from our model.
Keywords: migration; risk; diversification; bunching
JEL Codes: J61; O15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Increased correlation of incomes at home and in foreign destinations (F29) | discourages migration (F22) |
| Higher expected income at home (G59) | reduces likelihood of migration (F22) |
| Rise in the correlation of incomes between southern Italy and northern Italy (D31) | increases domestic migration and decreases foreign emigration (J61) |
| Share of construction employment (L74) | positively influences migration decisions (F22) |