The Effect of Remittances on Mexican Employment

In recent years, Mexican remittances from the United States have shown a marked upward trend even during the Covid-19 pandemic. This context has led to the resurgence of questions related to the impact of these external development transfers on different economic metrics for the recipient households.This paper implements an instrumental variable strategy to answer whether there is a causal relationship between remittances and different labor market metrics: working hours, the probability of entering the labor market, and hourly wage. The results show no causal relationship between remittances and work decisions on Mexican households. However, there is evidence of a positive effect on the hourly wage as measured by labor income per hour worked