Migration and the Sending Economy: A Disaggregated Rural Economy Wide Analysis

Most economic research on migration impacts in source economies focuses on the households that send migrants and receive remittances, ignoring linkages that transmit migration’s influences to others in local and regional economies. This paper offers an alternative, disaggregated economy wide perspective on migration and its impacts. It presents and illustrates a methodology to understand not only migration’s effects on migrant-sending households, but also the ways in which these households transmit influences of migration to others in the source economy, via local market linkages. Data from the 2003 Mexico National Rural Household Survey are used to calibrate a series of interacting rural household models nested within a general equilibrium model of the whole rural economy. This modeling approach combines the strengths of micro models focusing on rural households with economy wide models, which highlight economic linkages among economic actors but traditionally have been implemented at an aggregate (national or multi-national) level. It explicitly takes into account the market structures that govern economic interactions and promote or retard the spread of migration effects within sending economies. Simulations reveal that the impacts of international migration and remittances on sending areas may be positive or negative and depend critically on the ways in which local markets transmit impacts among households.