Rational inattention and migration decisions Articles uri icon

publication date

  • September 2020

start page

  • 1

end page

  • 22

volume

  • 126

International Standard Serial Number (ISSN)

  • 0022-1996

Electronic International Standard Serial Number (EISSN)

  • 1873-0353

abstract

  • Acquiring information about destinations can be costly for migrants. We model information frictions in the rational inattention framework and obtain a closed-form expression for a migration gravity equation that we bring to the data. The model predicts that flows from countries with a higher cost of information or stronger priors are less responsive to variations in economic conditions in the various destinations, as migrants rationally get less information before deciding where to move. The econometric analysis reveals systematic heterogeneity in the pro-cyclical behavior of migration flows across origins that is consistent with the existence of information frictions.

keywords

  • gravity equation; information; international migration; rational inattention