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Dollarization and the Mexican labor market

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  • George J. Borjas
  • Eric Fisher

Abstract

This paper examines how dollarization affects wages and employment in the Mexican labor market. Dollarization is modeled as a fixed real exchange rate and also as a potentially increased inflow of capital from abroad. The effects of dollarization depend upon whether adopting a fixed exchange reduces the rate of return on emigration and helps to attract foreign capital. The paper investigates how Mexican emigration to the United States responds to changes in bilateral economic conditions. The evidence indicates that the flow of illegal immigrants from Mexico into the United States is sensitive to economic conditions and is more volatile when the Mexican monetary authorities have fixed the exchange rate in the past. In contrast, the legal immigrant flow is not sensitive to changes in relative economic conditions.
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Suggested Citation

  • George J. Borjas & Eric Fisher, 2001. "Dollarization and the Mexican labor market," Proceedings, Federal Reserve Bank of Cleveland, pages 626-647.
  • Handle: RePEc:fip:fedcpr:y:2001:p:626-647
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    Cited by:

    1. Prachi Mishra & Antonio Spilimbergo, 2011. "Exchange Rates and Wages in an Integrated World," American Economic Journal: Macroeconomics, American Economic Association, vol. 3(4), pages 53-84, October.
    2. Amaranta Melchor del Río & Susanne Thorwarth, 2006. "Tomatoes or Tomato Pickers? - Free Trade and Migration in the NAFTA Case," Working Papers 0429, University of Heidelberg, Department of Economics, revised Dec 2006.
    3. Robertson, Raymond, 2003. "Exchange rates and relative wages: evidence from Mexico," The North American Journal of Economics and Finance, Elsevier, vol. 14(1), pages 25-48, March.
    4. Gaetano Antinolfi & Todd Keister, 2001. "Dollarization as a monetary arrangement for emerging market economies," Review, Federal Reserve Bank of St. Louis, issue Nov., pages 29-40.

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    Keywords

    Mexico ; Labor market;

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