Journal of Development Economics

Migration under Liquidity Constraints: Evidence from Randomized Credit Access in China

Abstract

This study proposes a model of migration with liquidity constraints and empirically examines the impacts of credit access on migration using data from a randomized control trial for a village banking program in China. The program increases migration by household members in treatment villages, especially in villages with low levels of assets and high migration costs. These findings are consistent with the theoretical prediction that access to credit has a greater effect on migration among households that are liquidity constrained when there are substantial upfront migration costs. Further evidence is provided by quantifying transportation costs and housing rent at the destinations.

JEL classification: G23; J21; J61; O15; O16; Q14

Keywords: Migration; Microfinance; Misallocation; Liquidity constraints