Immigration, remittances and business cycles
Federico Mandelman () and
Andrei Zlate ()
No 998, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)
We use data on border enforcement and macroeconomic indicators from the U.S. and Mexico to estimate a two-country business cycle model of labor migration and remittances. The model matches the cyclical dynamics of labor migration to the U.S. and documents how remittances to Mexico serve an insurance role to smooth consumption across the border. During expansions in the destination economy, immigration increases with the expected stream of future wage gains, but it is dampened by a sunk migration cost that reflects the intensity of border enforcement. During recessions, established migrants are deterred from returning to their country of origin, which places an additional downward pressure on the wage of native unskilled workers. Thus, migration barriers reduce the ability of the stock of immigrant labor to adjust during the cycle, enhancing the volatility of unskilled wages and remittances. We quantify the welfare implications of various immigration policies for the destination economy.
Keywords: Emigrant remittances; Emigration and immigration (search for similar items in EconPapers)
Date: 2010, Revised 2010
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mig
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Journal Article: Immigration, remittances and business cycles (2012)
Working Paper: Immigration, remittances, and business cycles (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgif:998
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