FRB: Immigration, Remittances and Business Cycles

International Finance Discussion Papers

Immigration, Remittances and Business Cycles
Federico Mandelman and Andrei Zlate
2010-998 (June 2010, latest version February 2012)

Abstract: Using data on border enforcement and macroeconomic indicators from the U.S. and Mexico, we estimate a two-country business cycle model of labor migration and remittances. The model matches the cyclical dynamics of unskilled migration, and documents the insurance role of remittances in consumption smoothing. Over the cycle, immigration increases with the expected stream of future wage gains, but it is dampened by a sunk emigration cost. Migration barriers slow the adjustment of the stock of immigrant labor, enhancing the volatility of unskilled wages and remittances. Changes in border enforcement have asymmetric welfare implications for the skilled and unskilled households.

Full paper, latest version (972 KB PDF) | Full paper (screen reader version) - forthcoming
Original version (1086 KB PDF)

Keywords
Labor migration, sunk emigration cost, skill heterogeneity, international business cycles, Bayesian estimation

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Last update: February 13, 2012