Working Papers 

Location Uncertainty & Migrant Saving Choices [PDF]

Abstract: How does uncertainty over future location impact saving? The precautionary motive predicts higher saving in the face of uncertainty. Yet, I find that permanent migrants who face uncertainty over their right to stay save 30% less than comparable natives. Using quasi-experimental variation from two reforms to German citizenship law, I show that gaining access to citizenship causally raises migrants' saving rates by 3.2 percentage points --- fully closing the persistent residual gap with natives and shifting their portfolios towards illiquid assets like housing. I formally prove how the precautionary prediction can reverse by specifying a life-cycle model that relaxes the standard assumptions of state independent resource access and utility. When allowing for cross-border liquidation costs and country preferences, location uncertainty generates lower expected returns and lower marginal utility --- both of which can outweigh the precautionary motive. Original survey data confirms the mechanism: perceiving a higher risk to one's right to stay is associated with lower saving.