Migration Background and Asset Allocation: Comparing Strategies in Germany

Becker, Charlotte Clara

Migration research often focuses on aspects of integration related to identification, education, and employment. Little is known about the consequences of migration on individuals’ financial behavior and how the investment strategies of those with and without a migration background might differ. Differences, however, could be expected due to, for example, the uncertainty of residency and less secure long-term perspectives that migrants might face.

We expect that individuals with a migration background, specifically those who migrated themselves, those without local citizenship, and those who have only been in the country of destination for a short amount of time, might focus more on assets that are easily transferable across borders. These assets might include traditional savings accounts, shares, and funds. Individuals without a migration background on the other hand face fewer uncertainties regarding their residency and the long-term availability of certain financial products. Therefore, they might have more varied investment strategies. They might be more likely to invest in assets that are either non-transferable or have higher costs attached to the transfer. This might include real estate or business shares as well as state-subsidized pensions.

For the analyses, we will use representative data from the fourth wave of the Panel on Household Finances (PHF) collected by the German Central Bank in 2021. The data set includes roughly 3000 individuals, 10% of which have a migration background.

Preliminary results only partly support the hypotheses. While those with a migration background had larger shares of their assets in savings accounts and were less likely to participate in voluntary, state-subsidized pensions, they also invested smaller shares of their assets into the stock market and showed lower stock market participation rates overall. Regarding real estate investments, no differences were found. These results hold even after controlling for socio-economic aspects and financial literacy.