Remittances to Mexico: Recent Trends Disclaimer: The views expressed herein are those of the presenter; they do not necessarily reflect the views of the Federal Reserve Bank of Dallas or the Federal Reserve System. Financial Education & Economic Inclusion The Immigrant Experience Hosted by Federal Reserve Bank of Dallas The Consulate General of Mexico in Dallas Financial Fitness Greater Dallas Jesus Cañas Federal Reserve Bank of Dallas

Recent trends in remittances Great recession/Housing bust Effects of remittances In general our paper Summary Outline

Remittances flat since 2009 Millions of dollars real, s.a.

Electronic transfers money orders Cash and kind Remittances are mostly sent electronically Avg. transaction amount in 2012: $312

Remittances are more relevant to high migration states 5 % Share of state GDP in 2012

Sectorial distribution of Mexican immigrant male workers In the U.S. Source: March 2012 Current Population Survey NOTE: the denominator is total Mexican immigrant male workers in the U.S. Source: March 2007 Current Population Survey NOTE: the denominator is total Mexican immigrant male workers in the U.S

Remittances yoy% 5mma Construction employment yoy%, 5mma % Remittances quite responsive to construction employment growth % service employment yoy%, 5mma

On recipient households Increase income and consumption Reduce poverty but maybe also labor supply Increase investment (for credit constrained hh) Human, physical capital; self-employment On the greater economy/labor force Aggregate demand shifts out, economy should grow and prices, wages and employment rise Income, wage inequality may worsen Effects of Remittances

Do Remittances Boost Economic Development? Evidence from Mexican States Joint work with Pia Orrenius, Madeline Zavodny, & Roberto Coronado How do remittances affect economic development in the home country? Labor markets Wage distribution School enrollment This study’s contribution Exploit variation in panel of Mexican states

Results suggest remittances lead to Declines in employment and unemployment Increased wages Improvements in the wage distribution Fraction of lowest-paid falls, fraction of workers in the middle rises Future work Explore differences in formal, informal labor market effects Do Remittances Boost Economic Development? Evidence from Mexican States Joint work with Pia Orrenius, Madeline Zavodny, & Roberto Coronado

Summary Not yet at pre recession levels Highly dependent on the construction sector More relevant to high migration states Important because they can raise incomes and reduce poverty rates

Top ten receptors of remittances in 2012 (billions of US dollars) Average transaction amount in 2012: $312

Remittances yoy% 5mma Manufacturing employment yoy%, 5mma Graphical correlation between remittances and US employment growth % %

tend to increase with migrants’ earnings education family ties and probability of return tend to decrease with migrants’ length of stay in the host country Remittances

Participation of Mexican immigrant workers In U.S. labor force Source: March 2012 Current Population Survey NOTE: the denominator is total U.S. labor force Source: March 2007 Current Population Survey NOTE: the denominator is total U.S. labor force