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Do remittances boost economic development? Evidence from Mexican states

  • Pia M. Orrenius
  • Madeline Zavodny
  • Jesús Cañas
  • Roberto Coronado

Remittances have been promoted as a development tool because they can raise incomes and reduce poverty rates in developing countries. Remittances may also promote development by providing funds that recipients can spend on education or health care or invest in entrepreneurial activities. From a macroeconomic perspective, remittances can boost aggregate demand and thereby GDP as well as spur economic growth. However, remittances may also have adverse macroeconomic impacts by increasing income inequality and reducing labor supply among recipients. We use state-level data from Mexico during 2003–07 to examine the aggregate effect of remittances on employment, wages, unemployment rates, the wage distribution, and school enrollment rates. While employment, wages and school enrollment have risen over time in Mexican states, these trends are not accounted for by increasing remittances. However, two-stage least squares specifications among central Mexican states suggest that remittances shift the wage distribution to the right, reducing the fraction of workers earning the minimum wage or less.

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File URL: http://dallasfed.org/assets/documents/research/papers/2010/wp1007.pdf
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Paper provided by Federal Reserve Bank of Dallas in its series Working Papers with number 1007.

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Date of creation: 2010
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Handle: RePEc:fip:feddwp:1007
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  1. 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.
  2. McKenzie, David & Rapoport, Hillel, 2006. "Can migration reduce educational attainment ? Evidence from Mexico," Policy Research Working Paper Series 3952, The World Bank.
  3. Acosta, Pablo & Fajnzylber, Pablo & Lopez, J. Humberto, 2007. "The impact of remittances on poverty and human capital : evidence from Latin American household surveys," Policy Research Working Paper Series 4247, The World Bank.
  4. Barham, Bradford & Boucher, Stephen, 1998. "Migration, remittances, and inequality: estimating the net effects of migration on income distribution," Journal of Development Economics, Elsevier, vol. 55(2), pages 307-331, April.
  5. Cox-Edwards, Alejandra & Rodríguez-Oreggia, Eduardo, 2009. "Remittances and Labor Force Participation in Mexico: An Analysis Using Propensity Score Matching," World Development, Elsevier, vol. 37(5), pages 1004-1014, May.
  6. Rapoport, Hillel & Docquier, Frederic, 2006. "The Economics of Migrants' Remittances," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  7. Adams, Richard Jr. & Page, John, 2005. "Do international migration and remittances reduce poverty in developing countries?," World Development, Elsevier, vol. 33(10), pages 1645-1669, October.
  8. Mishra, Prachi, 2007. "Emigration and wages in source countries: Evidence from Mexico," Journal of Development Economics, Elsevier, vol. 82(1), pages 180-199, January.
  9. Amuedo-Dorantes, Catalina & Georges, Annie & Pozo, Susan, 2008. "Migration, Remittances and Children’s Schooling in Haiti," IZA Discussion Papers 3657, Institute for the Study of Labor (IZA).
  10. Orrenius, Pia M. & Zavodny, Madeline, 2005. "Self-selection among undocumented immigrants from Mexico," Journal of Development Economics, Elsevier, vol. 78(1), pages 215-240, October.
  11. 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.
  12. Pablo Ibarraran & Darren Lubotsky, 2007. "Mexican Immigration and Self-Selection: New Evidence from the 2000 Mexican Census," NBER Chapters, in: Mexican Immigration to the United States, pages 159-192 National Bureau of Economic Research, Inc.
  13. Richard H. Adams, 2006. "International Remittances and the Household: Analysis and Review of Global Evidence," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 15(2), pages 396-425, December.
  14. Borraz Fernando, 2005. "Assessing the Impact of Remittances on Schooling: the Mexican Experience," Global Economy Journal, De Gruyter, vol. 5(1), pages 1-32, April.
  15. McKenzie, David & Sasin, Marcin J., 2007. "Migration, remittances, poverty, and human capital : conceptual and empirical challenges," Policy Research Working Paper Series 4272, The World Bank.
  16. Pablo Acosta & Cesar Calderón & Pablo Fajnzylber & Humberto López, 2006. "Remittances and Development in Latin America," The World Economy, Wiley Blackwell, vol. 29(7), pages 957-987, 07.
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