Abstract: This paper studies the interactions between return migration and individual portfolios of assets and debt across geographic locations. A life cycle model is proposed of migrant households facing individual risk and incomplete markets with partial contract commitment. Migrants can hold both home assets and host assets. Because of default risk, credit constraints in the host country depend on collateral and individual characteristics related to the likelihood of remigration. A numerical version of the model calibrated to native British households in the BHPS 2005 is considered as a point of departure to consider the distinctive features of the immigrants' environment consistent with positive selection and data on the timing of return from the UK. Positive selection requires that the stochastic components of the individual income/unemployment process is not correlated between locations. A model with this feature that also matches speed of return is used as a benchmark to study savings and borrowing behaviour of migarnts and natives.

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