Repeat Migration and Cumulative Remittances as Mechanisms for Wealth Inequality in Mexico

Migrant remittances are one of the largest sources of external finance for many developing countries in the world, yet the distributional impact of these flows in origin communities is poorly understood due to theoretical and methodological problems in prior work. To study remittances, researchers focus on migrants, effectively treating migrating and remitting as independent processes, and report mixed empirical findings that suffer from sample selection bias. This study develops a theoretical framework that views migration and remittances as connected and cumulative processes, and draws implications for distributional outcomes. The framework is implemented in an integrated statistical model of remittances that takes into account selectivity of migration, and tested on data from Mexico-U.S. migration flows between 1965 and 2008. The findings show that migrants initially originate from poor households, which, over repeated migration trips and cumulative remittances, reach levels of wealth to surpass households without migrants. This dynamic leads to increasing wealth disparities in migrantsending communities of Mexico, and challenges the Kuznetsian prediction of first increasing, then declining, inequality with increasing migration.