A mobility curse? The impact of migration on access to credit

Type Journal Article
Title A mobility curse? The impact of migration on access to credit
Publication (Day/Month/Year) 2009
URL http://econweb.umd.edu/~benyishay/Research/BenYishay (Oct 2009) - A Mobility Curse.pdf
Does being a migrant in a developing country cause an individual to receive less access to credit? Migrant status can be a useful signal for lenders in settings with weak contract enforcement and in the absence of well developed information markets. I pursue this contract enforcement-based explanation intensively using Guatemalan data. To address reverse causality and omitted variable issues, I adopt an instrumental variables approach. I identify individuals who are most sensitive to violence or crime and who are born in particularly dangerous locations; the interaction of these factors causes these individuals to have a higher propensity to move. After controlling for a variety of characteristics related to creditworthiness and demand, I nonetheless nd that such migrants do have less access to formal credit. Furthermore, weak enforcement of contracts dominates alternative explanations of this result, such as moral hazard, adverse selection, and social capital.\n

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