Immigration,remittances and business cycles |
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Authors: | Federico S Mandelman Andrei Zlate |
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Institution: | 1. Federal Reserve Bank of Atlanta, Research Department, Atlanta, GA 30309, USA;2. Board of Governors of the Federal Reserve System, Division of International Finance, Washington, DC 20551, USA |
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Abstract: | Using data on border enforcement and macroeconomic indicators from the U.S. and Mexico, we estimate a two-country business cycle model of labor migration and remittances. The model matches the cyclical dynamics of unskilled migration, and documents the insurance role of remittances in consumption smoothing. Over the cycle, immigration increases with the expected stream of future wage gains, but it is dampened by a sunk emigration cost. Migration barriers slow the adjustment of the stock of immigrant labor, enhancing the volatility of unskilled wages and remittances. Changes in border enforcement have asymmetric welfare implications for the skilled and unskilled households. |
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