Farm and non-farm impact of migration to USA on rural Mexico

Abstract

Migration of labor out of rural areas in Mexico is an increasingly important feature of rural development in Mexico. New literature on migration and development suggests that migrants play a role of financial intermediaries, making it possible for households to overcome credit constraints in their capability to attain the transition from small-scale, self-sufficient agriculture, to a market oriented production. The purpose of this research is to examine the impact of migration on farm and non-farm income at a household level. Using a simultaneous equation model and data from a rural household survey from Mexico, I have tested the hypothesis that neither remittances nor migration have an effect on farm and non-farm income. The econometric findings suggest that the loss of labor to migration has a significant direct negative effect on non-farm income but the direct effect on farm income is not statistically significant. However, there is evidence that remittances have a significant positive effect on both income sources, so that migration has an indirect effect that might compensate for the loss of labor.