Information Cascade Effects and Immigration
Information cascade effects may explain the immigration pattern in the United States that we observe today. According to the Census Bureau, the number of foreign-born population in the United States has been growing at an accelerating rate over the last few decades. The Pew Research Center analysis of the Census Bureau’s immigrant population data reveals that despite the significant increase in the number of foreign-born population, “Almost all of the states that have the highest immigrant population shares have remained the same.” In other words, immigrants continue to settle in states that already have a substantial presence of immigrant population. According to the analysis, California and New York ranked first and second, respectively, in 1990, 2000, and 2012 in having the highest percentage of immigrant population. This ensuing behavior can be accounted for by both information-based and direct benefit effects of information cascades.
Many families immigrate to the United States after observing their family members, friends, neighbors, and other acquaintances in their extended network settle in America first. Their own private information about the many opportunities in America combined with information-based cascade effects influence many families’ decisions. The circumstances that these families contemplating on whether or not to immigrate find themselves in contain all the necessary ingredients of information-based cascade effects: there is a decision to be made (to immigrate or to remain in their respective countries); families make decisions sequentially over time; and each family has some private information. Families also observe the decisions earlier people made, but they do not necessarily know other people’s private information. Therefore, information cascade effects in immigration patterns are inevitable. Given the limited information, more and more people may be opting to immigrate to states where they have seen other people in their network settle after immigration.
There also exist direct benefit effects in following the crowd. Immigrating to areas where there already is a significant presence of familiar foreign-born population may provide ease in the transition to unaccustomed lifestyles, which consequently improves the immigrants’ living standards. In other words, living among a crowd of familiar people presents values in itself. Because there are apparent information-based and direct benefit effects, we cannot neglect information cascade effects in analyzing immigration patterns that we have been observing in the United States over the past few decades.
Resources:
- http://www.pewresearch.org/fact-tank/2014/05/14/15-states-with-the-highest-share-of-immigrants-in-their-population/
- http://www.asiamattersforamerica.org/southkorea/data/koreanamericanpopulation