Study Analyzing Migration of People Due to Financial Constraints

Study Analyzing Migration of People Due to Financial Constraints

Abstract

Using data gathered for the evaluation of the rural component of Oportunidades, Mexico's flagship anti-poverty programmer, I show that poor households entitlement to an exogenous, temporary but guaranteed income stream increases US migration, even if this income is primarily consumed, and that some households may use the entitlement to this income stream as collateral to finance the migration. Individuals who begin migrating as a result of this income shock come from families with no counterfactual US migrants, are in the center of the local projected wage distribution, and deteriorate migratory abilities. 

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These findings imply that financial barriers to foreign migration bind impoverished Mexicans, some of whom would want to move but cannot afford to. If generalizable, they suggest that as economic development and anti-poverty and micro-finance initiatives remove financial restrictions for the poor, Mexican migration to the United States would rise, necessitating more border enforcement.


Introduction

In 2011, there were about 12 million Mexican immigrants in the United States, half of whom were illegal (Passel et al. 2012). This study contends that in the absence of financial restrictions for certain low-skilled prospective migrants, Mexican migration to the United States, particularly illegal migration, would be greater and its skill composition would be worse. The following is the hypothesis that underpins this argument. For unskilled employees, the net advantages of migration are substantial. According to Freeman and Oostendorp (2005) and Hoefort and Hofer (2007), the ppp-adjusted US-Mexico pay ratio for an unskilled worker doing the same job is between 6.57 and 7.49. 

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However, visits to the United States are expensive. In the late 1990s, illegal migrants who hired a smuggler paid between $250 and $1500 to cross the border. Financing these travels may be challenging for the poor, particularly if they have no family in the United States, due to their limited saving and borrowing capacity.


Conclusion

This study takes use of an exogenous income fluctuation that occurs in impoverished rural Mexican communities to see whether financial restrictions hinder certain unskilled Mexicans from moving to the United States. Some people from the center of the local skill distribution begin moving to the US once their family becomes eligible for a transfer. According to the empirical data, the transfer, which is mostly spent on non-durable consumption, is not directly utilized to fund the additional travels. Rather, its entitlement, which is guaranteed for two years, allows certain families to finance the expensive journey to the United States by giving access to loans. The distribution of migrant skills is deteriorating as a result of the new arrivals.

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