Impact of the 1996 US Immigration Policy Reform (IIRIRA) on Mexican migrants' remittances

Purpose: This paper investigates the effect of the US Illegal Immigrant Reform and Immigrant Responsibility Act of 1996 (IIRIRA) on the remitting patterns of Mexican immigrants. Key literature / theoretical perspective: The theoretical model builds on Dustmann (1997), Agrawal and Horowitz (1999) and Amuedo-Dorantes and Pozo (2006). It is a two period model with uncertainty where the migrant decide the level of consumption each period, remittances, and time to spend in the host country in order to maximize an expected utility function. Design/methodology/approach: Using the Mexican Migration Project data (MMP128) I have design a quasi-experiment using a difference-in-differences (DiD) estimator. I explore the remitting behaviour of undocumented migrants with last entry to US after April, 1997 (treatment group) and compare its change over time with those who migrated legally (control group). Findings: Preliminary results show that post-IIRIRA, illegal migrants remit significantly more than their legal counterparts. This is consistent with the hypothesis of being risk-averse agents who transfer more money to their home country as a mechanism to insure themselves against higher degree of uncertainty within their host countries. Research limitations/implications: One of the main limitations of the study arise from the characteristics of the MMP128 database because interviews different individuals every year, which characterize it as a repeated cross-section of households. Therefore it is a possibility that unobservable individual characteristics cause the change in remitting behaviour rather than the actual policy. Practical and Social implications: Migrants’ remittances are considered important source of capital formation in developing countries, therefore a better understanding of the effect that migration policies have on these flows may be crucial to boost the socioeconomic situation of immigrants-sending countries and the allocation of public resources in the receiving countries.