Credit Constraints and the Labour Supply of Immigrant Families in Canada

The hours of work decisions in immigrant and nonimmigrant families are compared using an intertemporal labor-supply model estimated over data from the 1981 and 1991 Census of Canada surveys. The family investment hypothesis is evaluated. The hypothesis states that the immigrant family is unable to borrow in the first years after migration and that the immigrant wife responds by working longer hours so as to support family consumption and her husband's labor market adjustment. The empirical evidence, in general, supports the hypothesis since credit constraints are found to significantly distort the labor-supply decisions of recently arrived immigrant families.