Does Migration Raise Agricultural Investment? An Empirical Analysis for Rural Mexico

The effect of remittances on capital accumulation remains a contested topic. This paper uses a

panel data set from rural Mexico to investigate the impact of remittances on agriculture and

livestock investments. After controlling for the endogeneity of migration through an instrumental

variable estimation our empirical results show that international migration has a significantly

positive effect on the accumulated agricultural assets but not on livestock capital. This suggests

that households use the capital obtained from international migration only to overcome liquidity

constraints for subsistence production whereas migration itself seems to be the superior

investment option compared to other productive activities such as livestock husbandry.