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Network Effects and the Dynamics of Migration and Inequality: Theory and Evidence from Mexico

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Author Info

  • David Mckenzie

    (Stanford University)

  • Hillel Rapoport

    ()
    (Department of Economics, Bar-Ilan University; CADRE, University of Lille II; and CREDPR, Stanford University)

Abstract

International migration is costly and initially only the middle class of the wealth distribution may have both the means and incentives to migrate, increasing inequality in the sending community. However, the migration networks formed lower the costs for future migrants, which can in turn lower inequality. This paper shows both theoretically and empirically that wealth has a nonlinear effect on migration, and then examines the empirical evidence for an inverse U-shaped relationship between emigration and inequality in rural sending communities in Mexico. After instrumenting, we find that the overall impact of migration is to reduce inequality across communities with relatively high levels of past migration. We also find some suggestive evidence for an inverse U-shaped relationship among communities with a wider range of migration experiences.

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File URL: http://www.biu.ac.il/soc/ec/wp/3-04/3-04.pdf
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Bibliographic Info

Paper provided by Department of Economics, Bar-Ilan University in its series Working Papers with number 2004-3.

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Date of creation: Mar 2004
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Handle: RePEc:biu:wpaper:2004-3

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Postal: Faculty of Social Sciences, Bar Ilan University 52900 Ramat-Gan
Phone: Phone: +972-3-5318345
Fax: +972-3-7384034
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Web page: http://econ.biu.ac.il
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Keywords: Migration; remittances; inequality; network effects;

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References

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