Publication Date
10-2024
Abstract
This paper examines the effects of return migration on inequality, poverty, and income in Mexico, using a reversal in the migration flow in the late 2000s. For the first time since the Great Depression, more migrants returned to Mexico than those who migrated to the United States. We use this return migration shock to construct a two-period panel for municipalities in Mexico and employ an instrumental variable approach using the exogenous variation of U.S. immigration enforcement policies. Our results show that return migration significantly reduced inequality and poverty while boosting income per capita. These effects appear most pronounced municipalities with higher baseline levels of poverty and lower inequality. Furthermore, individual-level analysis suggests that the observed reduction in inequality was driven by wage premiums among returnees and positive spillover effects on non-migrants with a low educational attainment. The findings highlight the potential of return migration as a tool for economic development in migrant-sending countries.