Subnational Bilateral Remittance Flows in the U.S.-Mexico Corridor: A Multi-Source Imputation and Validation

More than $65 billion annually flows through Mexico’s remittance corridor, the largest such pathway in the Western Hemisphere. Yet, the distribution of these flows across regions and the implications for financial inclusion—or alternatively, perpetuating inequality—remain poorly understood. This paper exploits bilateral remittance flows between U.S. and Mexican states during 2013–25 to construct and validate a multi-source origin–destination framework linking Banco de México’s U.S.-state outflows with Mexican state-level receipts. We develop allocation matrices from consular registrations, household surveys, and transaction records and validate them against official state-level inflows. Validation against official Mexican state-level receipts yields a clear hierarchy, suggesting that matrices based on consular records explain more than four-fifths of cross-sectional variance in official receipts, outperforming survey-based and transaction-based alternatives, as the matrices preserve the concentrated geography of the settled diaspora. Using the preferred specification, we recover the bilateral structure of the U.S.–Mexico remittance system and analyze its evolution during a period that includes the COVID-19 shock. At the national level, growth in remittance inflows is largely explained by scale effects. However, at the regional level, the South-Southeast is the only region where remittance growth exceeds scale predictions. Shifts in migrant composition drive this divergence, particularly an increasing share of migrants from Southern-origin states in the United States, as well as the rising importance of specific origin states such as Oaxaca. These results highlight the importance of accounting for bilateral flow structures when studying remittances. By preserving spatial concentration, our framework provides new insights into how external shocks transmit unevenly across regions and how remittances shape subnational development trajectories in Mexico.