Working Paper: CEPR ID: DP3287
Authors: Gil S. Epstein
Abstract: We introduce the idea that informational cascades can explain the observed regularity that emigrants from the same locations also tend to choose the same foreign locations. Thus informational cascades generates herd behaviour. Herd behaviour is compared with the network externalities explanation of the same phenomenon. The relation between social tensions and herd behaviour is observed when local populations are xenophobic.
Keywords: Herd Behavior; Informational Cascades; Migration; Network Externalities; Xenophobia
JEL Codes: F22; J61
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Prior emigrants influence new emigrants' choices (F22) | Clustering effect in specific foreign locations (F29) |
| Number of individuals who have already emigrated to a location (J11) | Subsequent individuals will also choose that location (R30) |
| Herd behavior (C92) | Individuals neglect accurate private information (D82) |
| Observation of prior emigrants' decisions (F22) | Decision based on perceived better information held by others (D80) |
| Presence of prior emigrants (F22) | Probability of following the herd increases (C92) |