The role of marriage in immigrants' human capital investment under liquidity constraints

Sarit Cohen-Goldner

"This paper presents a two-period human capital investment model of married and single immigrants under binding liquidity constraints, which explains alternative patterns in the host country's labor market. These patterns are also compared to those of natives who face a perfect capital market. By extending Eckstein and Weiss' model (2004) from the case of single immigrants with accessibility to a perfect capital market to the case of credit-constrained immigrant families, it is shown that the comparative advantage in investment that determines which spouse will invest more in local skills depends on his/her imported human capital growth rate rather than on its level. This comparative advantage can lead to full or partial specialization in work and investment activities within immigrant households. However, the level invested by each spouse is non-increasing with the level of the...