The macroeconomic impact of remittances on the sending country: The case of Mexico-United States migration

Most academic research on migration has been concerned primarily with the effects of migration on receiving countries. Studies using small community surveys to examine the impact of migration and remittances on local and regional development seem to imply that remittances have few beneficial long-term effects on economic growth and development for the migrant-sending countries. The purpose of this study is to shift the focus of attention to the labor sending countries and to analyze the effects of remittances for the Mexican economy as a whole. The negative view that Mexican migrants engage in "conspicuous consumption" is also critically examined.;An analysis of the immediate uses of remittance income ignores the potential stimulus to indigenous industries, which in turn generates a multiplier effect on aggregate demand, employment and capital investment in excess of the original expenditure. Using a Social Accounting Matrix multiplier analysis for Mexico, this study shows that a ;It is also commonly argued that migrants engage in conspicuous consumption, which exerts a negative impact on the consumption patterns of household that do not receive remittances. Using data from the National Household Income and Expenditures Survey, it was found that Mexican households receiving remittances devote a higher proportion of current expenditures to investment and savings than those households that do not receive remittances. Moreover, remittance-receiving households have lower income elasticities for current consumption and for durable goods expenditures than those who do not receive remittances. Thus, the negative view based on community surveys is unwarranted.