Migration and Consumption

Misuraca, Roberta; Zimmermann, Klaus F. Working Paper Migration and Consumption UNU-MERIT Working Papers, No. 2024-006 Provided in Cooperation with: Maastricht Economic and Social Research Institute on Innovation and Technology (UNU-MERIT), United Nations University (UNU) Suggested Citation: Misuraca, Roberta; Zimmermann, Klaus F. (2024) : Migration and Consumption, UNU-MERIT Working Papers, No. 2024-006, United Nations University (UNU), Maastricht Economic and Social Research Institute on Innovation and Technology (UNU-MERIT), Maastricht This Version is available at: https://hdl.handle.net/10419/326902 Standard-Nutzungsbedingungen: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen. 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Zimmermann Published 3 April 2024 Maastricht Economic and social Research institute on Innovation and Technology (UNU-MERIT) email: [email protected] | website: http://www.merit.unu.edu Boschstraat 24, 6211 AX Maastricht, The Netherlands Tel: (31) (43) 388 44 00 UNU-MERIT Working Papers ISSN 1871-9872 Maastricht Economic and social Research Institute on Innovation and Technology UNU-MERIT UNU-MERIT Working Papers intend to disseminate preliminary results of research carried out at UNU-MERIT to stimulate discussion on the issues raised. Migration and Consumption Roberta Misuraca University of Bari and GLO [email protected] Klaus F. Zimmermann UNU-MERIT, Maastricht University and GLO [email protected] Draft: April 2024 Abstract: A scarce literature deals with the consumption implications of cultural assimilation and integration, ethnic clustering and diasporas, the marginal propensity to consume, home production and allocation of time, ethnic consumption, migration, and trade, as well as native consumption responses. Consumption patterns reflect how migrants integrate into their new environment while preserving their cultural origins. The identity formation may also affect economic and societal relations between the involved countries. Keywords: ethnic identity, ethnic imports, ethnic niches, ethnic clusters, diaspora, ethnic goods, cultural assimilation, ethnosizer, consumption propensity, home production, allocation of time. JEL-codes: E21, J15, Z10 1 This chapter focuses on international migration and consumption, that is, how individuals who leave their country temporarily or permanently to seek work or education, or to reunite with their family, modify or strengthen their consumption patterns, and finally also affect the consumption structure in the host country. Migrant consumption depends on a number of socio-cultural factors, such as family and cultural traditions, the role of religion, a possible experience of naturalization, and economic factors, such as working conditions and income. Considering ethnicity in the context is crucial: while migration is the mere act of moving, ethnicity is the set of values, traditions, and cultures with which the individual was raised. It affiliates with the place where the individual originates. Ethnicity is based on sharing geographically and historically defined values of a group or country of origin. Differently, ethnic identity is an individual attribute, it may change over time and is shaped by experiences during life. Ethnic identity is unique for each individual: immigrants from the same place, with the same cultural heritage, develop completely different identities. The focus of ethnicity is the group, while ethnic identity involves the individual. In face of scarce literature, we deal with the consumption implications of cultural assimilation and integration, ethnic clustering and diasporas, the marginal propensity to consume, home production and allocation of time, ethnic consumption, migration, and trade, as well as native consumption responses and challenges and future research directions. Our review has a focus on migrants in the sense of foreign-born, but we also use studies covering individuals with migration backgrounds and different ethnicities as well as internal migrants. Cultural assimilation and integration International migrating is a drastic life-changer, often associated with a re-shaping of the individual identity. The resulting ethnic identity could impact different aspects of immigrants’ lives, becoming a central part of the self-definition of the individual's personality. From a general point of view, the main approach in literature starts from two opposing perspectives on the formation of ethnic identities: the assimilation theories (Gordon, 1964; Akerlof, 1997; Patacchini and Zenou, 2012) and the multiculturalism and conflict theories (Tajfel and Turner,1982). The existence of opposite mechanisms in the formation of ethnic identities also calls into question the concepts of cultural 2 complementarity and cultural substitutability in the socialization process (Bisin and Verdier, 2000). To measure the degree of ethnic identity, Constant and Zimmermann (2008) and Constant et al. (2009) have developed the concept of an “ethnosizer”, where an overall index of ethnic identity is calculated on the basis of a set of indicators including food consumption. Indicators help to classify the degree of “assimilation” to the host country, the persistence with the culture of the country of origin (“separation”), confusion or “marginalization”, if diverse habits were developed, and “integration”, if both home and host country traditions are relevant. Taken consumption separately, individuals could be followed in panel data to reveal the process of adaption in this indicator. Ethnic clustering and diasporas Following the review of Constant and Zimmermann (2016), we consider diaspora as “a well-defined group of migrants and their offspring with a joined cultural identity and ongoing identification (active or dormant) with the country or culture of origin as they envision it” (p. 1110). The diaspora influences the main economic and social dynamics in the home and host country, in various ways, acting as a bridge in the economic and cultural relations between the two countries, and also affecting the consumption structures in both countries. In line with most academic research, the intensity of the ethnic formal and informal relationships that immigrants in the diaspora maintain with their country of origin represent a strategic cultural baggage, able to reduce information costs for domestic firms (Giovannetti and Lanati, 2017). Through the presence of in-depth knowledge about the acquisition of information on distribution networks, how to find the right component in the country of origin, as well as relevant strategic information on how to adapt a product to a specific context, the diaspora could boost the supply of ethnic goods. Furthermore, the relevance and the size of the diaspora in the host country have the potential to increase the domestic demand for ethnic goods, through cultural diffusion and branding of ethnic consumption Conceptually related are ethnic enclaves or ethnic clusters. When arrived in the host country, immigrants often tend to cluster culturally and geographically distinct from the rest of the country. The presence of a strongly rooted ethnic network in the destination country, the existence of a so-called "enclave economy" and the role of established and successful ethnic peers, are elements that make the ethnic enclave a safe harbor, 3 especially for newly arrived immigrants. Ethnic enclaves have the potential to boost the domestic demand for ethnic goods: the more important the ethnic community in the country of destination, the more the related ethnic culture will be widespread and accepted by the natives, stimulating the consumption of specific ethnic goods (doner kebab business, i.e.). Moreover, the size of the ethnic enclaves acts as a demand driver for ethnic goods, increasing the import of these products. Finally, the political and social role of the members of ethnic enclaves in the destination countries can contribute to the large-scale dissemination and branding of some aspects of ethnic cultures, such as sushi restaurants or Italian movies in their original language). Marginal propensity to consume A substantial literature emphasizes heterogeneity in the response of consumption to income changes (Fisher et al., 2020; Jappelli and Pistaferri, 2020), whereas the focus has been on heterogeneity in income and wealth as the main drivers of the heterogeneous marginal propensity to consume (MPC) across households. The role of preference and other personal traits is usually accounted for as unobserved heterogeneity and treated using longitudinal data to remove possible biases. A notable exception is Gelman (2021), who shows how the MPC varies considerably with personal traits, and not only by temporary income shocks combined with precautionary savings or borrowing constraints. This literature typically fails to capture the specific role of cultural or ethnic characteristics that are individual-specific. Migrants are different from natives: they tend to consume less and save more conditional on income (Dustmann et al., 2017), but their savings and remittance behavior strongly depends on income, as Merkle and Zimmermann (1992) have shown for Germany. However, temporary movers save and remit more than permanent migrants (Galor and Stark, 1990; Merkle and Zimmermann, 1992). Irregular migrants may have higher income risk, and consequently, the amount of precautionary savings they accumulate is higher. Migrants face lower wages and a higher probability of unexpected job loss. Furthermore, birthplace matters for immigrants’ remittance behavior. Despite the relevance of this topic, starting from the pioneering work of Carroll et al. (1994), only a few recent studies analyzed the consumption behavior of different socio-demographic groups (Dustmann et al., 2017; Gelman, 2021; Piracha and Zhu, 4 2012). Dustmann et al. (2017), exploiting a unique survey of both legal and illegal migrants in Italy, investigate the effect of status on their consumption behavior. In particular, the authors find wide differences in consumption patterns between the groups: illegal and legal immigrants tend to strongly modify their consumption, adapting them to different exposures to income risk, conditional on background characteristics, underlining the predominant role played by precautionary savings for consumption. Along this line, Piracha and Zhu (2012), using a difference-in-differences approach, analyze immigrants’ saving behavior as a result of a change in the citizenship requirements in Germany. The authors show that easing citizenship acquisition leads to a considerable reduction in immigrant savings and (as a form of additional saving) remittances. From a more general perspective, Canbary and Grant (2019) investigate the MPC for different socioeconomic households in the UK. Based on a pseudo-panel of the socioeconomic conditions of household heads, the authors show that households with lower socio-economic status have higher MPC, which gradually rises when moving from lower to upper levels. Given the presence of differences in access to the credit market across different socioeconomic groups, households excluded from the credit market are less able to smooth consumption in the presence of income shocks. Leisure, home production and time allocation There is ethnic diversity in time use based on different cultural preferences, gender structures within the family, as well as different concepts of leisure. Moreover, following the mainstream literature on non-market time use and household production (Becker, 1965; Ribar, 2013), a driving factor in the allocation of time is the wage. As it is well documented, immigrants tend to have worse job positions, with bad work conditions and lower wages; moreover, ethnic minorities also experience lower labor market performance compared to white immigrants (Zaiceva and Zimmermann, 2014). Time use is therefore also a question of different opportunity costs (Becker, 1965). Zaiceva and Zimmermann (2011) find an ethnicity gap between non-white ethnic minorities and natives in activities such as childcare and food management, with relevant differences between ethnic minorities male and female. In particular, females from ethnic groups tend to spend more time than white females. Subsequently, Zaiceva and 5 Zimmermann (2014), focusing on the effect of ethnicity on time spent on secondary home production, home, and leisure in the UK, find that non-white ethnic minorities tend to spend less time than natives in simultaneous activities, also point out the existence of a gender gap between male and female belonging to ethnic groups: females engage more in multitasking activities. Cultural goods convey symbols and values that are interpreted differently by individuals belonging to different cultures. As a consequence, the use of cinemas, theaters, sports events, music, museums, and monuments has the power to transmit unique cultural models, peculiar to the cultural message that they aim to pass on, thus becoming a vehicle for acculturation and integration of cultures. Said differently, people tend to buy products (cultural in this sense) that take on meaning by what they symbolize, preferring to consume goods that are close to their cultural values set (Maystre et al., 2014) or that reflect their identity (Sirgy, 1982). Some studies point out that the consumption of cultural goods plays a central role in defining identity, also reporting information about ourselves and our origins (Berger and Heath, 2007). Despite this evidence, there is a lack of empirical studies on immigrants’ cultural choices in the host countries, and in particular, on how the immigrants’ preferences for cultural goods can impact on acculturation process (Bertacchini et al., 2022). At the same time, the sociological literature has deeply investigated the individual factors underlying cultural participation, however prohibiting every generalization and delegating the debate to mere classification (Falk and KatzGerro, 2016). Finally, other studies tried to explain the cultural consumption patterns of immigrants in the host countries by incorporating the concept of ethnicity into the cultural participation debate (Katz-Gerro et al., 2009), however often focusing primarily on multicultural societies or by placing in the wake of intergenerational transmission discussion (Novak-Leonard, 2015). Bertacchini et al., (2022) explore the drivers of immigrants’ cultural participation in Italy. The authors, focusing on the immigrants’ propensity to consume cultural and leisure goods in the host country, find that individual determinants such as language proficiency, duration of stay and intention to remain in the destination country positively impact immigrants’ participation in leisure and cultural activities. This study also confirms the role of cultural distance in explaining immigrants’ cultural choices. 12 Constant, A.F. and Zimmermann, K.F. 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