Migration networks and risk diversification: How shocks in the US affect job search strategies in Mexico

• Applicant: Dr. Esther Gehrke
• Subject Area: Economic Policy, Applied Economics
• Term: from 2018 to 2019
• Project identifier: Deutsche Forschungsgemeinschaft (DFG) - Project number 408081103

International migration to developed countries has risen substantially over the last five decades. This has had strong implications for destination as well as origin countries. It is generally agreed that immigration triggered productivity gains in destination countries. But despite the huge economic relevance of international migration and remittances, we still know fairly little about the development effects of international migration networks.This project investigates the effects of international migration on household decision making in origin countries. While previous literature has largely focused on income effects of remittances inflows, this project seeks to establish if having access to international migration networks – whereby I mean networks between migrants and their family and friends left behind – has an ex-ante insurance effect on households in origin countries. There is substantial evidence that uncertainty affects decision making of risk-averse households and individuals. If migration networks serve an income diversification objective, then they should also affect household decisions that are sensitive to risk. If, for example, risk-averse job seekers prefer low-return low-risk jobs over time-consuming job search activities with uncertain – but better quality – outcomes, then providing insurance via migration networks can improve the quality of job matches, and be welfare enhancing in origin countries beyond the direct benefits of remittances inflows.Due to the endogeneity of migration decisions, this project explores shocks to migration networks between Mexico and the United States (US) that affect the (perceived) efficacy of migration networks – in terms of the probability of receiving income support in case of a shock in the future. Examples for such shocks are destination-specific changes in immigration laws, deportation practices or economic downturns. In a first step, this project will explore new data sources (i.e. social media data) to identify region-specific migration networks between the US and Mexico at the sub-national level. Using high-frequency labor force surveys, it will then analyze how shocks to these networks affect households’ job search strategies, their occupational choices and ultimately job quality in Mexico. The estimation strategy combines spatial variation in the typical destination of migrants from Mexico within the US, and time-variant shocks in the region of destination of these migrants, in a difference-in-differences approach.The results produced in this project aim to speak to the current international debate on the costs and benefits associated with international migration, as well as to shed light on the determinants of migratory decisions.

• DFG Programme: Research Fellowships
• International Connection: USA
• Host: Professorin Supreet Kaur, Ph.D.