CAPITAL MARKET IMPERFECTIONS, LABOR MARKET DISEQUILIBRIUM AND MIGRATION: A THEORETICAL AND EMPIRICAL ANALYSIS

Traditional analyses of the determinants of migration in less developed countries have focused on labor market conditions. This paper adapts a simple model to show that capital market conditions may be an important factor in individuals' migration decisions. Data from Ecuador are used to test this model, and the empirical results confirm the role of capital market imperfections—chiefly caused by financial repression—in shaping migration flows. Traditional labor market factors still matter, but the new finding may provide policy makers with new and lower-cost tools with which to affect migration outcomes.