Declining Outmigration and Local Labor Markets

We estimate the effects of the unprecedented decline in Mexican net migration from 2006 to 2012 on labor markets in Mexico. We employ an instrumental variable strategy that isolates demand for Mexican labor in the United States and relies on historical migration patterns. We find that lower-educated groups are more affected by the labor supply shock and remittance decline. The labor supply shock also generated declines in self-employment and increases in salaried work for lower and highly educated groups, indicating impacts beyond the would-be migrant group. Our findings are relevant in a global context where migration restrictions are more prevalent.