Mobility informal to formal sector in Mexico 2002--2006: The effect of remittances

In this paper, I analyze the effect of receiving remittances on the decision to work in the formal sector. The hypothesis is this variable increase the income of individuals, allowing to them to work in the formal sector and receiving the benefits of social security. In order to measure such effect, I use a panel database of Mexican individuals with observations in 2002 and 2006. I run a cross-sectional probit model which includes a dummy variable for receiving remittances in order to estimate the probability to work in the formal sector in 2006 conditional to individuals who worked in the (i) informal sector and those in the, (ii) formal sector, both in 2002. After controlling for other variables, I found that that receiving remittances has a positive effect on the decision to switch to the formal sector, and it is significative for individuals who worked in the formal sector in 2002.