Ethnic Networks and the Location Choice of Migrants in Europe; WIFO Working Papers 415/2011

In this paper we analyze the role of ethnic networks in the location decision of migrants to the EU-15 at the regional level. Using a random parameters logit specification we find a substantially positive effect of ethnic networks on the location decision of migrants. The effect is, however, decreasing in network size. Furthermore, we find evidence of spatial spillovers in the effect of ethnic networks: ethnic networks in neighboring regions significantly help to explain migrants' choice of target regions. The positive effects of ethnic networks thus also extend beyond regional and national borders. Analyzing the trade-off between potential income and network size, we find that migrants would require a sizable compensation for living in a region with a smaller ethnic network, especially when considering regions where only few previous migrants from the same country of origin are located.