International Finance Discussion Papers (IFDP)
June 2010 (Revised February 2012)
Immigration, Remittances and Business Cycles
Federico Mandelman and Andrei Zlate
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.
Accessible materials (.zip) | Original version (PDF)Keywords: Labor migration, sunk emigration cost, skill heterogeneity, international business cycles, Bayesian estimation
PDF: Full Paper
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