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

  • David Mckenzie

    (Stanford University)

  • Hillel Rapoport


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

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

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Date of creation: Mar 2004
Date of revision:
Handle: RePEc:biu:wpaper:2004-3
Contact details of provider: Postal: Faculty of Social Sciences, Bar Ilan University 52900 Ramat-Gan
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  8. Bauer, Thomas & Epstein, Gil S & Gang, Ira, 2002. "Herd Effects or Migration Networks? The Location Choice of Mexican Immigrants in the US," CEPR Discussion Papers 3505, C.E.P.R. Discussion Papers.
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  22. Ravi Kanbur & Hillel Rapoport, 2004. "Migration Selectivity and the Evolution of Spatial Inequality," Working Papers 2004-04, Bar-Ilan University, Department of Economics.
  23. Taylor, J. Edward, 1992. "Remittances and inequality reconsidered: Direct, indirect, and intertemporal effects," Journal of Policy Modeling, Elsevier, vol. 14(2), pages 187-208, April.
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