The Financial Assimilation of U.S. Immigrants

Una Okonkwo Osili, Indiana University
Anna Paulson, Federal Reserve Bank of Chicago

In this paper, we study the factors that affect financial assimilation of immigrants using longitudinal data from the 1996-2000 Survey of Income and Program Participation (SIPP). To our knowledge, this is the first economic study to investigate the size and composition of asset holdings of immigrants relative to that of natives using panel data. We investigate the impact of country of origin variables (including investor protections, degree of similarity to U.S. legal and financial institutions) on the financial assimilation of U.S. immigrants. Our results suggest that immigrants' use of financial services and portfolio composition converges to that of natives. However immigrants from countries with less-developed financial markets (relative to the U.S.) may assimilate at a slower rate compared with immigrants from countries with more developed financial institutions, other things being equal. The results from this study have the potential to inform current policy debates on U.S. immigrant adaptation.