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Immigration, remittances and business cycles

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  • Federico Mandelman
  • Andrei Zlate

Abstract

We use data on border enforcement and macroeconomic indicators from the U.S. and Mexico to estimate a two-country business cycle model of labor migration and remittances. The model matches the cyclical dynamics of labor migration to the U.S. and documents how remittances to Mexico serve an insurance role to smooth consumption across the border. During expansions in the destination economy, immigration increases with the expected stream of future wage gains, but it is dampened by a sunk migration cost that reflects the intensity of border enforcement. During recessions, established migrants are deterred from returning to their country of origin, which places an additional downward pressure on the wage of native unskilled workers. Thus, migration barriers reduce the ability of the stock of immigrant labor to adjust during the cycle, enhancing the volatility of unskilled wages and remittances. We quantify the welfare implications of various immigration policies for the destination economy.

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Bibliographic Info

Paper provided by Board of Governors of the Federal Reserve System (U.S.) in its series International Finance Discussion Papers with number 998.

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Date of creation: 2010
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Handle: RePEc:fip:fedgif:998

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Keywords: Emigrant remittances ; Emigration and immigration;

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Cited by:
  1. Simpson, Nicole B. & Sparber, Chad, 2012. "The Short- and Long-Run Determinants of Less-Educated Immigration into U.S. States," IZA Discussion Papers 6437, Institute for the Study of Labor (IZA).
  2. Federico Mandelman, 2013. "Labor Market Polarization and International Macroeconomic Dynamics," 2013 Meeting Papers 291, Society for Economic Dynamics.
  3. Alexis Antoniades & Ganesh Seshan & Roberto A. Weber & Robertas Zubrickas, 2013. "On altruism and remittances," ECON - Working Papers 131, Department of Economics - University of Zurich.
  4. Garcia, Pablo M & Rodriguez-Montemayor, Eduardo, 2010. "A primer of international migration: The Latin American experience and a proposal for a research agenda," MPRA Paper 24147, University Library of Munich, Germany.
  5. Andrei Zlate & Federico Mandelman, 2013. "Offshoring, Low-skilled Immigration and Labor Market Polarization," 2013 Meeting Papers 1073, Society for Economic Dynamics.
  6. Nicole B. Simpson & Chad Sparber, 2012. "The Short- and Long-Run Determinants of Less- Educated Immigrant Flows into U.S. States," CReAM Discussion Paper Series 1226, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  7. Simpson, Nicole & Sparber, Chad, 2010. "The Short-and Long-Run Determinants of Unskilled Immigration into US States," Working Papers 2010-06, Department of Economics, Colgate University.
  8. Peter Claeys & Luis Costa, 2012. "“A Note on the Relationship Between the Cyclicality of Markups and Fiscal Policy”," AQR Working Papers 201208, University of Barcelona, Regional Quantitative Analysis Group, revised Sep 2012.
  9. Ibrahim Sirkeci & Jeffrey H. Cohen & Dilip Ratha, 2012. "Migration and Remittances during the Global Financial Crisis and Beyond," World Bank Publications, The World Bank, number 13092, August.
  10. Maroula Khraiche, 2009. "Trade, Firm Structure, and Migration of Talent," Working papers 2009-35, University of Connecticut, Department of Economics.
  11. Ahmed, Junaid & Martinez-Zarzoso, Inmaculada, 2013. "Blessing or curse: The stabilizing role of remittances, foreign aid and FDI to Pakistan," Center for European, Governance and Economic Development Research Discussion Papers 153, University of Goettingen, Department of Economics.

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