Herd Effects and Migration

CEPR Discussion Paper Series No. 1811

Posted: 16 Oct 1998

See all articles by Gil S. Epstein

Gil S. Epstein

Bar-Ilan University - Department of Economics; IZA Institute of Labor Economics; University College London - CReAM - Centre for Research and Analysis of Migration

Arye L. Hillman

Bar-Ilan University - Department of Economics; Centre for Economic Policy Research (CEPR)

Date Written: March 1998

Abstract

In this paper we introduce the notion of herd effects or information cascades into models of migration-related phenomena. We consider individuals making sequential decisions regarding emigration. Each individual receives a signal which conveys private information regarding preferred locations abroad and also observes the decisions made by previous emigrants. The herd behavior which ensues gives rise to geographical concentration in host countries of immigrants from the one location. We show how herd effects can be expected to have both efficiency and political-economy consequences. We expect international factor allocation predicated on herd effects to be inefficient. Herd effects can also be the source of social tensions when the host country's resident population is xenophobic. In general, herd effects can lead to incorrect personal location decisions, since people are led to discount their private information. We also compare herd effects with the network-externalities explanation of immigrant concentration.

JEL Classification: F22, J61

Suggested Citation

Epstein, Gil S. and Hillman, Arye L., Herd Effects and Migration (March 1998). CEPR Discussion Paper Series No. 1811, Available at SSRN: https://ssrn.com/abstract=106211

Gil S. Epstein (Contact Author)

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+972 3 531 8937 (Phone)
+972 3 535 3180 (Fax)

HOME PAGE: http://faculty.biu.ac.il/~epsteig/

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

University College London - CReAM - Centre for Research and Analysis of Migration ( email )

Drayton House
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London, WC1H 0AX
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Arye L. Hillman

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel
+97 29 774 6424 (Phone)
+97 29 771 5628 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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