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Migration, Trade and FDI in Mexico

  • William Maloney
  • Patricio Aroca

Part of the rationale for NAFTA was that it would increase trade and FDI flows, creating jobs and reducing migration to the US. Since poor data on illegal flows to the US makes direct measurement difficult, this paper instead evaluates the mechanism behind these predictions using data on migration within Mexico where the census data permit careful analysis. We offer the first specifications for migration within Mexico incorporating measures of cost of living, amenities and networks. Contrary to much of the literature, labor market variables enter very significantly and as predicted once we attempt to control for substitutions vs. credit constraint effects. FDI and trade variables deter migration and appear to work through the labor market. Finally, we generate some tentative inferences about the impact on Mexico-US migration and find it to be of important magnitude.

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Paper provided by Econometric Society in its series Econometric Society 2004 Latin American Meetings with number 329.

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Date of creation: 11 Aug 2004
Date of revision:
Handle: RePEc:ecm:latm04:329
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  1. Robert C. Feenstra & Gordon H. Hanson, 1995. "Foreign Direct Investment and Relative Wages: Evidence from Mexico's Maquiladoras," NBER Working Papers 5122, National Bureau of Economic Research, Inc.
  2. Lucas, Robert E.B., 1993. "Internal migration in developing countries," Handbook of Population and Family Economics, in: M. R. Rosenzweig & Stark, O. (ed.), Handbook of Population and Family Economics, edition 1, volume 1, chapter 13, pages 721-798 Elsevier.
  3. James R. Markusen & Stephen Zahniser, 1997. "Liberalization and Incentives for Labor Migration: Theory with Applications to NAFTA," NBER Working Papers 6232, National Bureau of Economic Research, Inc.
  4. John M. Abowd & Richard B. Freeman, 1991. "Immigration, Trade, and the Labor Market," NBER Books, National Bureau of Economic Research, Inc, number abow91-1, December.
  5. David Mckenzie & Hillel Rapoport, 2004. "Network Effects and the Dynamics of Migration and Inequality: Theory and Evidence from Mexico," Working Papers 2004-3, Bar-Ilan University, Department of Economics.
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  7. Gourieroux,Christian, 2000. "Econometrics of Qualitative Dependent Variables," Cambridge Books, Cambridge University Press, number 9780521331494, October.
  8. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
  9. Gordon H. Hanson & Antonio Spilimbergo, 1996. "Illegal Immigration, Border Enforcement, and Relative Wages: Evidence from Apprehensions at the U.S.-Mexico Border," Research Department Publications 4036, Inter-American Development Bank, Research Department.
  10. Gourieroux,Christian, 2000. "Econometrics of Qualitative Dependent Variables," Cambridge Books, Cambridge University Press, number 9780521589857, October.
  11. Vanderkamp, John, 1971. "Migration Flows, Their Determinants and the Effects of Return Migration," Journal of Political Economy, University of Chicago Press, vol. 79(5), pages 1012-31, Sept.-Oct.
  12. Daniel Chiquiar & Gordon H. Hanson, 2005. "International Migration, Self-Selection, and the Distribution of Wages: Evidence from Mexico and the United States," Journal of Political Economy, University of Chicago Press, vol. 113(2), pages 239-281, April.
  13. Stark, Oded & Taylor, J Edward, 1991. "Migration Incentives, Migration Types: The Role of Relative Deprivation," Economic Journal, Royal Economic Society, vol. 101(408), pages 1163-78, September.
  14. Markusen, James R. & Venables, Anthony, 1996. "The role of multinational firms in the wage-gap debate," Discussion Papers, Series II 322, University of Konstanz, Collaborative Research Centre (SFB) 178 "Internationalization of the Economy".
  15. Katharine Donato & Jorge Durand & Douglas Massey, 1992. "Stemming the tide? Assessing the deterrent effects of the immigration reform and control act," Demography, Springer, vol. 29(2), pages 139-157, May.
  16. Jonathan S. Leonard & Rachel McCulloch, 1991. "Foreign-Owned Businesses in the United States," NBER Chapters, in: Immigration, Trade, and the Labor Market, pages 261-283 National Bureau of Economic Research, Inc.
  17. Rivera-Batiz, Francisco L, 1986. "Can Border Industries Be a Substitute for Immigration?," American Economic Review, American Economic Association, vol. 76(2), pages 263-68, May.
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