The investigation reported above confirms the existence and significance of home institutional effects, yet the questions of when and how these restrictions start affecting an individual’s investment choices and how long these influences last has not yet been examined. Does the age at migration matter? Do home-country effects persist in both immigrants who migrated at an early age and those who migrated at a late age? How long do these effects continue to exist under the influence of a new formal institutional framework? As before, the following analysis was carried out using the probit model for estimating the 2002 and 2006 data and the random effect logit model for estimating the panel data.
Table 2.7 Effects of home institutions on the probability of equity investment by immigrants aged 15 or older, depending on their age at migration to Australia (panel data)
Age at arrival in Australia
Variables All 1-15 16-20 21+
No year of arrival control
Ln (Rule of Law) 1.789*** 0.279 1.460 2.234*** (0.332) (0.609) (1.104) (0.468) Log likelihood -3001 -994.6 -279.5 -1596
Year of arrival control
Ln (Rule of Law) 1.788*** 0.0582 1.376 2.236*** (0.332) (0.628) (1.136) (0.468) Log likelihood -3001 -988.4 -278.1 -1596 Number of observations 5790 1862 630 3177
Notes: In addition to the coefficients reported above, the regressions also include controls for age, age squared, wealth,
income, employment, education, gender, marital status, children and MSR. Standard errors are indicated in parentheses. *** indicates p<=0.01, ** indicates p<=0.05, * indicates p<=0.1.
Table 2.7 addresses the first question by presenting how the institutional effect changes depending on the age of an immigrant at the time of settling in Australia, using the panel data13. Two sets of estimates are produced: one that does not include a year of arrival control
13
The application of the 2002 and 2006 data produces similar results; hence, only panel data estimates are presented. The other results can be found in Table A.7 Effects of home institutions on the probability of equity investment by immigrants aged 15 or older, depending on their age at migration to Australia (2002 and 2006 data)Table A.7 in Appendix A.
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and one that does. The sample has been divided into three age groups: the first group consists of those who arrived in Australia as a teenager aged under 16, the second group consists of individuals aged 16 to 20 at the time of arrival, and the last group consists of those who were aged 21 or older at the time of immigration. Similarly to the results produced by Osili and Paulson (2008), the effect of country-of-origin institutions is not present in the first group but is present in the third group of immigrants who were aged 21 or older at the time of arrival. Unlike immigrants to the US though, the investment decisions of Australian immigrants who were aged 16 to 20 are not affected by the institutions in their countries of origin. This difference could be explained by the different features of populations that are exposed to slightly different educational systems and family upbringing in both countries, which, in the Australian context, possibly puts less importance on the trustworthiness of home institutions.
The results of the analysis of the continuance of institutional effect are presented in Table 2.8. The sample is divided into five groups and, due to the similarity of results produced with and without individual’s age at arrival controls, only those with controls are presented. The panel data and the data for 2002 show the strong influence on the equity investment decision in the first seven years spent in Australia, although this is not significant according to the data collected in 2006. All data samples, however, show no effect for immigrants living in Australia for 8 to 12 years and for those living in Australia for 13 to 17 years.
The striking difference from the US data is that the institutional influence is still persistent and significant in immigrants even after spending more than 28 years in Australia. Also, as argued by Osili and Paulson (2008), the effect of informal institutions is persistent for all immigrants to the US who migrated up to 27 years ago, whereas Australian immigrants do not show this tendency. While it is not surprising that recent immigrants are still affected by their home institutions, it is unexpected that immigrants with a period of residence of 18 years and longer are. This may have happened because these immigrants are from an older and more conservative cohort, the effects of which are not fully captured by the age variables.
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Table 2.8 Effects of home institutions on the probability of equity investment by immigrants aged 15 or older, depending on years spent in Australia, with age at arrival controls Years in Australia Variables All 1-7 8-12 13-17 18-27 28+ Panel data Ln (Rule of Law) 1.391*** 2.719*** 0.0745 0.751 1.686*** 1.499** (0.334) (0.979) (0.506) (1.070) (0.625) (0.602) Log likelihood -2963 -305.7 -297.6 -410.9 -515.2 -1401 Number of observations 5761 666 574 730 1041 2719 2002 Ln (Rule of Law) 0.314*** 0.919*** -0.498 -0.374 0.559* 0.400* (0.117) (0.296) (0.374) (0.319) (0.335) (0.207) Log likelihood -1696 -204.5 -160.4 -215.5 -195.6 -775.0 Pseudo R- squared 0.167 0.195 0.159 0.212 0.376 0.195 Number of observations 3060 431 309 427 457 1408 2006 Ln (Rule of Law) 0.407*** 0.464 0.486 0.352 0.579** 0.406* (0.122) (0.420) (0.387) (0.360) (0.267) (0.212) Log likelihood -1545 -96.28 -115.6 -170.2 -297.8 -745.1 Pseudo R- squared 0.132 0.182 0.260 0.0888 0.231 0.164 Number of observations 2701 224 255 290 584 1311
Notes: In addition to the coefficients reported above, the regressions also include controls for age, age squared, wealth,
income, employment, education, gender, marital status, children, MSR and individual’s age at arrival. Standard errors are indicated in parentheses. *** indicates p<=0.01, ** indicates p<=0.05, * indicates p<=0.1.
For the purpose of comparison and testing of the age factor hypothesis, similar regressions were carried out for the 36+ respondents. The results of this exercise are presented in
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Table A.8 in Appendix A. The home institutions effect in this age group is present only after spending more than 17 years in Australia, which is also the case for the main dataset that includes younger individuals. These results suggest that immigrants aged 15 to 35 (or 21 to 35 as reflected in Table 2.7) have a strong institutional influence from their countries of origin in the first seven years of living in Australia, but older individuals are not exposed to this impact. However, both age groups experience positive institutional influence after being nearly 20 years away from the country of origin.
This implies that during the three decades since the 1970s the characteristics of immigrants have changed. In particular, immigrants aged 21 to 35 retain their institutional factors for up to seven years but this influence then dies away. However immigrants who arrived a substantial time ago (in 1988 or before) do not lose the impact of their home institutional controls even after they have been in Australia for 28 years or more. These migrants arrived in Australia before the government changed the focus of its migration policy to labour market outcomes in the 1980s (Spinks 2010). The above results reflect the possibility that those who arrived before this change, mostly immigrants from countries with weak institutions, migrated mainly to join their families or as refugees (Walsh 2008), and it is expected that they would take a conservative approach to investing.