Mexican Microenterprise Investment and Employment: The Role of Remittances

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Feb 2007
Using data from Mexican surveys of Microenterprises conducted between 1992 and 1998, we examine the association between migration to the US and investment in microenterprises, the use of paid and unpaid labor, and the earnings of micro entrepreneurs. We find that investments in microenterprises are positively associated with migration rates and that in enterprises owned by females, migration is also associated with greater use of unpaid labor. For males, the connection between migration and the log of invested capital grew much stronger during the 1990s. Given the rapid increase in out-migration and remittance flows during the 1990s, this is consistent with expectations. These results apply to the migration rate of the microenterprise owner's state of birth, regardless of his/her current state of residence, and hold when current migration rates are instrumented for using historical migration rates. Kernel densities show that entrepreneurs born in high migration regions in Mexico have higher earnings.