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MIGRATION, SOCIAL NETWORKS, AND CREDIT: EMPIRICAL EVIDENCE FROM PERU
Author(s) -
LASZLO Sonia,
SANTOR Eric
Publication year - 2009
Publication title -
the developing economies
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.305
H-Index - 30
eISSN - 1746-1049
pISSN - 0012-1533
DOI - 10.1111/j.1746-1049.2009.00091.x
Subject(s) - collateral , market liquidity , empirical evidence , business , bond market , face (sociological concept) , economics , monetary economics , finance , philosophy , epistemology , social science , sociology
We seek evidence of the causal relationship between migration, social networks, and the probability of receiving credit in a developing country where credit markets are weak and internal migration is common. Migrants may face binding asymmetric information constraints as they often lack collateral. Social networks can help mitigate these constraints. Conversely, migrants might face higher liquidity constraints and might, therefore, demand more credit than nonmigrants. The effect of migration on participation in the credit market is thus ambiguous. Compounding this, migration and credit may be jointly determined. We utilize rich data from Peru to establish the net effect of migration on credit and the role that social networks play in this relationship.