Essays on the migration, remittance and savings behavior of Mexican workers

In the first essay, I construct and test a model of migration that incorporates both wage differentials and relative deprivation. Relative deprivation is defined as an individual viewing his situation as less than a community standard. In testing this model I find that the Harris-Todaro wage differential does well in the case of Mexico-U.S. migration but that the relative deprivation approach appears to be a better specification in the case of intra-Mexico migration. An additional contribution of this paper to the migration literature is the employing of a cluster approach to estimate wage differentials. The cluster approach takes account of individual characteristics in a manner that avoids the potential endogeneity problems in using estimated wages. For policymakers, the paper's results indicate that relative deprivation within communities may be a driving force "pushing" individuals in rural-to-urban migration while Mexico-U.S. migration is more a function of the "pull" of higher U.S. wages. Policies attempting to slow rural-to-urban migration must address both relative and absolute outcomes in communities.;The second essay presents a model of migrant savings and remittances. In this model, the migrant views remittances both as a way to increase household consumption and as a savings mechanism. This approach implies that migrant's savings and remittances behavior will be affected by the rates of return on money saved by the migrant and by the household. The model provides insight into the effect of access to financial intermediaries on remittances and savings. Evidence from Mexican workers in the U.S. shows that migrants are viewing savings and remittances as substitute savings mechanisms. Remittances rise and migrant savings fall when the rate of return available to the Mexican household increases relative to the rate of return on savings available to the migrant in the host country. The opposite occurs when the migrant's relative rate of return on savings, as compared to Mexican household, rises. For communities wanting to increase remittances inflows, these results imply that they should increase the savings and investment opportunities available to households. On the macroeconomic level, countries should avoid policies that lower the return on savings, such as interest rate ceilings.