The Effect of Mexican Emigration to the US on Trade and Inward FDI in Mexico*

Abstract

Using a panel data set of the 32 Mexican states and the 10 years from 2008 and 2017, this paper estimates the potential contribution of migration to international trade and foreign direct investment (FDI). In the context of Mexico and the United States, we estimate models with a generalized propensity scores (GPS) methodology in order to account for the endogeneity of the migration decision, in addition to baseline gravity models. We find a generally positive and significant relationship between Mexico-US migration and Mexico-US imports, exports, and inward FDI from the US to Mexico. While mixed evidence is found across the various gravity estimations regarding the relationship between Mexico-US migration and inward FDI from the US to Mexico, the GPS results signal consistency across various estimations. Even when controlling for size of the state population, size of the state economy, distance from the capital city of each state to the Mexico-US border, and the fact that a state is on the Mexico-US border, basic results remain consistent. We conclude that in this context migration complements trade and inward FDI, and point to transnationalism as a central factor that leads to migration’s positive contribution.

KEYWORDS:

• International migration
• trade
• economic integration
• transnationalism

JEL classifications:

• F15
• F22

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been corrected with minor changes. These changes do not impact the academic content of the article.

Notes

1 It is important to point out that most of the studies about these topics perform analyses from the destination countries’ point of view.

2 See Hirano and Imbens (2004) for the proof that these two steps actually remove bias.

3 See Hirano and Imbens (2004) and Bia and Mattei (2008) for details. For ease of exposition, details of the GPS procedure are not reported here; these are available for imports, exports, and FDI estimations upon request. The GPS estimations are carried out in Stata with the doseresponse program.

Additional information

Funding

This work was supported by Instituto Nacional de Estadistica y Geografia.

Notes on contributors

Michael Gove

Michael Gove works on research mainly focused on the economics of immigration. He holds a PhD in economics from Florida International University. Currently, he is Associate Professor in the Department of Economics & Finance at the University of North Georgia, where he also serves as Director of the Center for Economic Education.

Liliana Meza González

Liliana Meza González works on research mainly focused on the Mexican labor market, the incorporation of Mexican migrant workers abroad, and the insertion of foreign laborers in Mexico. She holds a PhD in Labor Economics from the University of Houston, and a masters in Economics from the Instituto Tecnológico Autónomo de México (ITAM). Currently, she is a full-time professor and researcher in the International Studies Department at Universidad Iberoamericana in Mexico City. She worked as an Economics Researcher at the National Mexican Statistics Office (INEGI). Liliana has been part of the Mexican National Research System (SNI) since 1999.