As the size of networks increases over time, finding employment becomes less uncertain, inducing more risk-averse individuals to migrate. Given that recent research suggests a negative relationship between risk aversion, entrepreneurial potential and cognitive ability, the model predicts a decrease in the quality of these ‘unobservable’ characteristics as networks grow larger. In addition, the dynamic relationship between network size and uncertainty leads to the following hypotheses: when migrants are more reliant on networks for finding work, more individuals will migrate, they will migrate sooner and at a faster rate. I use German Socio-Economic Panel Study (SOEP) data to provide empirical support for the predictions of the theoretical model.
Download WP-54-2012: The effect of networks and risk attitudes on the dynamics of migration