Remittances, Migration and Informality in Mexico. A Simple Model

Jose Brambila Macias
Authors registered in the RePEc Author Service: Jose Brambila-Macias

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper, we analyse the possible channels through which informality, remittances and migration could interact and consequently affect growth in Mexico. In order to do so, we develop a simple endogenous growth model that allows for remittances and the coexistence of the formal and informal sector in the production function. In the literature, there is no agreement regarding the effects of the informal sector on economic growth. Moreover, thanks to globalization, migration and remittances have increased significantly their macroeconomic weight, renewing interest in studying the interactions that these variables might have, especially in developing countries like Mexico, where remittances are the third source of income after oil and tourism revenues. Our model shows that remittances play a crucial role on enhancing the Mexican resource constraint, while the possibility of migration in the informal sector drains the aggregate labor force. However, the magnitude of potential remittances may offset this loss, thus having an overall positive effect on economic growth.

Keywords: Growth; Informal Sector; Migration; Remittances (search for similar items in EconPapers)
JEL-codes: F22 F24 O17 O40 (search for similar items in EconPapers)
Date: 2008-03-31
New Economics Papers: this item is included in nep-dev and nep-mig
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:8373

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