Migration from Mexico to the United States constitutes one of the world's largest labor flows and generates enormous capital flows in the opposite direction. Corresponding to each of these flows is a distinct view of the role migration plays in local economic development. The optimistic view stresses the role of remittances in stimulating demand and relaxing credit constraints, while the pessimistic view emphasizes the departure of the economy's skilled and motivated workers. Using data from the Mexican Migration Project and exploiting stickiness in migrants' choice of U.S. destination, I examine the effects of migrant demand shocks on business ownership and job choice in Mexican communities. I find little evidence to support the pessimistic scenario. All members of the community, including non-migrants, appear to benefit from improved labor market and business investment opportunities when high U.S. demand induces migrants to leave. Demand for local products rather than credit supply effects seems to be responsible for this outcome.
RESEARCH IN PROGRESS
"Migration and Industrial Development”
Political discourse and neoclassical theory agree that industrial development at home is a substitute for migration. In practice, the relationship may be weakened or reversed by the role of migration in financing business investments and the existence of upfront migration costs. This project uses data from Mexico’s Population and Economic censuses to examine the relationship between the growth of manufacturing employment and flows of prime-age men at the municipality level, employing both ordinary least squares and an instrument based on industrial composition. Preliminary results suggest a surprisingly weak relationship.
"Promotion, Turnover and Adverse Selection” (with Jin Li)
This paper develops a model that examines the optimal assignment of workers into jobs under adverse selection. Workers differ by their disutility of effort; jobs differ by their productivity and ease of effort monitoring. Firms would like to assign hard workers to "managerial" jobs because efforts in these jobs are harder to monitor. To prevent the lazy workers from mimicking the hard workers, we study the use of two instruments at firms' disposal: requiring long hours and distorting job assignments. The model has an essentially unique separating equilibrium. In equilibrium, workers are required to exert inefficiently high levels of effort in earlier stages of their career and firms commit to promote only a fraction of qualified workers. We analyze the effects of job mobility and relative job productivities on the characteristics of this equilibrium.