Migration and Entrepreneurship in Mexico

Daniel Yi Xu and Kevin Thom
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Daniel Yi Xu: New York University and NBER
Kevin Thom: New York University

No 958, 2010 Meeting Papers from Society for Economic Dynamics

Abstract: We hope to make a novel contribution to the literature by developing a model of an individual's migration and entrepreneurship decisions over the course of the life-cycle which captures all three explanations identified above. Using data from the MMP, we will estimate the parameters of this structural model. Such structural parameter estimates will allow us to perform interesting counter-factual policy experiments, such as assessing the consequences of changes in US migration policy or Mexican entrepreneurship policy on the behavior of Mexican workers. Understanding the relative strengths of the three mechanisms is crucial for shaping a policy response to poverty. If mechanisms (1) and (2) above are dominant, then policies that increase the ease of migration will also stimulate greater entrepreneurship in Mexico. However, if mechanism (3) dominates, then migration and entrepreneurship may be alternate pathways to the alleviation of poverty. In this case, policymakers must be careful that their proposals are promoting the most expedient pathway. Of course, all three of these mechanisms may be operative, and the optimal policy response will depend on their relative strengths.

Date: 2010
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