Network effects and the dynamics of migration and inequality: Theory and evidence from Mexico

David Mckenzie, Hillel Rapoport

Research output: Contribution to journalArticlepeer-review

408 Scopus citations

Abstract

International migration is costly and initially only the middle class of the wealth distribution may have both the means and incentives to migrate, which can increase inequality in the sending community. However, the migration networks formed lower the costs for future migrants, which can in turn lower inequality. This paper shows both theoretically and empirically that wealth has a nonlinear effect on migration, and then examines the empirical evidence for an inverse U-shaped relationship between emigration and inequality in rural sending communities in Mexico. After instrumenting, we find that the overall impact of migration is to reduce inequality across communities with relatively high levels of past migration. We also find some suggestive evidence for an inverse U-shaped relationship among communities with a wider range of migration experiences.

Original languageEnglish
Pages (from-to)1-24
Number of pages24
JournalJournal of Development Economics
Volume84
Issue number1
DOIs
StatePublished - Sep 2007

Bibliographical note

Funding Information:
Thanks to Nicole Hildebrandt, Cristobal Huneeus and Pascal Lévy-Garboua for excellent research assistance; suggestions and comments from Gordon Hanson, two referees, Frederic Docquier, Andrew Foster, Kaivan Munshi, Christopher Udry and seminar participants at Boston University, Brown, UC Berkeley, UC Davis, UC Santa Cruz, the World Bank DECRG and Yale; and Chris Woodruff for generously supplying his historic migration rate data. We are grateful for financial support for this project from the Rockefeller Foundation.

Funding

Thanks to Nicole Hildebrandt, Cristobal Huneeus and Pascal Lévy-Garboua for excellent research assistance; suggestions and comments from Gordon Hanson, two referees, Frederic Docquier, Andrew Foster, Kaivan Munshi, Christopher Udry and seminar participants at Boston University, Brown, UC Berkeley, UC Davis, UC Santa Cruz, the World Bank DECRG and Yale; and Chris Woodruff for generously supplying his historic migration rate data. We are grateful for financial support for this project from the Rockefeller Foundation.

FundersFunder number
Rockefeller Foundation

    Keywords

    • Inequality
    • Migration
    • Network effects
    • Remittances

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