Neighborhood Effects in Migration Decisions in Rural Mexico
Given the economic significance of migration and its relevance for policy, it is important to understand the factors that cause people to migrate. We add to the literature on the determinants of migration by examining whether neighborhood effects matter for migration decisions. There are several reasons why a household's migration decisions may depend on the migration decisions of its neighbors, including migration networks and information externalities. Using instrumental variables to address the endogeneity of neighbors' decisions, we empirically examine whether neighborhood effects in migration decisions actually take place in rural Mexico, whether the interactions depend on the size of the village, and whether there are nonlinearities in the neighborhood effects. Our results show that there is a significant and positive own-migration neighborhood effect in migration to the US. In our base case specification, an increase of one standard deviation in the fraction of neighbors with migration to the US increases a household's probability of migration to the US by around 12.3 percentage points. We also find that neighborhood effects vary nonlinearly with village size for migration to the US. We do not find significant neighborhood effects in migration within Mexico. Our results therefore suggest that neighborhood effects among households in a village have an important role in household migration decisions to the US that has been heretofore neglected in the literature.