Self-selection of Mexican migrants in the presence of random shocks: Evidence from the Panic of 1907

Using height as a proxy for physical productivity of labour, this paper estimates the selection of Mexican migration to the United States at the beginning of the flow (1906-08), and it exploits a natural experiment of history to evaluate the impact of random shocks on short-run shifts in selection into migration. The results suggest that the first Mexican migrants belonged to the upper ranks of the height distribution of the Mexican working class. Additionally, the financial crisis of 1907, an exogenous labour demand shock in the United States, significantly modified local migrant self-selection. Before the crisis, migrants were positively selected relative to the military elite of the time. During the crisis, migrants became negatively selected, but returned to a stronger positive selection after the crisis. The shift to a less positive selection was influenced by the absence of the enganche, an institution that neutralized mobility and job-search costs. The stronger positive selection in the post-crisis period was partially driven by persistent droughts in Mexico that increased the population at risk of migration.