Transcript Slide 1

Why, What and Who? Mexican Immigrants Along the U.S.-Mexico Border
Alberto Dávila
Neuhaus Center for Economic Education
University of Texas- Pan American
Why do Mexican Immigrants come to the U.S.?
•Economic theory makes predictions that when marginal
benefit > marginal cost, economic agents (producers,
consumers, workers) take action to produce more,
consume more, change jobs, etc. in order to maximize
some stated objective (profits, utility).
•Consider minimum wage differentials between Mexico
and the U.S. (for an 8-hour workday): Mexican workers
would make about $ 4.80 and the U.S. workers $ 58.00!
The wage gap is large, so incentive to migrate and work in
the U.S. is strong.
With these observations in mind, there are some insights (among
many) from the social-science literatures regarding this migration
process that I would like to discuss in this section of my presentation.
•The impact of maquiladoras on Mexican immigration to the U.S.
(Saenz and Dávila, 1990).
• When the Bracero Program of the 1950s ended, policymakers
sought to build the industrial infrastructure of northern Mexico to
create employment opportunities for the displaced Mexican braceros
returning to Mexico from the U.S. If successful, the idea was that this
Border Industrialization Program would serve as a deterrent to
Mexican immigration to the U.S. In our work, we show that this
program, and the subsequent development of the maquiladora
industry in northern Mexico, might have also attracted Mexican
workers from the interior of Mexico and that some of these workers
might have eventually migrated to the U.S.
•But do Mexican immigrant workers settle along the U.S.Mexico Border? (Mora, 2004)?
Most of the recent Mexican immigration has been for
Mexican immigrants to migrate to the so-called “nontraditional” regions of the U.S., such as the Midwest and the
Eastern U.S. (Anthony Bourdain, No Reservations , U.S.Mexico Border Episode, 2006).
•Are Mexican immigrants Pushed or Pulled to the U.S.?
The question is whether poor economic conditions
(high unemployment, low wages) are a stronger
determinant in the migration decision than good
economic conditions (low unemployment (?) and high
wages). According to some research (Dávila, 1983,
and work appearing in the American Economic
Review, by Hanson and Spilimbergo,1999), the push
forces appear to be stronger than the pull forces in the
in the Mexican immigration decision to the U.S.
•So which of these two economic forces does our
immigration reform target? Pull forces.
Starting with the Immigration Reform and Control Act of 1986,
employers where held accountable for hiring undocumented
workers. This IRCA has been called a “toothless tiger” in that
the interior enforcement resources deployed to enforce this
Act were minimal and employers where subjected to very weak
requirements to show culpability. A recent paper presented in
Denver at the ASSA meetings this year (Bohn, Lofstrom and
Raphael, 2111) suggests that Arizona laws (The Legal Arizona
Workers Act) that implement stricter employer sanctions have
proved successful, but this research does not address whether
strategies to combat undocumented Mexican immigration via
improved labor market conditions in Mexico would be more
successful.
What impact do Mexican immigrants have on the U.S. side of
the U.S.-Mexico border?
•A simple supply and demand analysis can help illustrate the
wage impact of an increase in labor supply resulting from an
increase in Mexican migration to a region (such as the
border). Consider Figure 1.
W
Supply_0
Supply_1

W0
W1
Demand
L0 
L1
Labo r
•But this analysis overlooks the types of U.S. labor impacted:
Mexican immigrant workers are substitutes for American
workers in the graphical analysis. If American and Mexican
immigrant workers are complements to each other, the wages
of American workers would rise as a result of the increase in
Mexican immigrant labor to the U.S.
•In general, while some workers would be adversely impacted
by the increase in Mexican immigrant labor to the U.S.
(American workers competing for the same jobs as Mexican
immigrant workers), others would benefit (American workers
who are complements to Mexican immigrant labor). And, as
long as Mexican immigrant labor is paid according to its
contributing value to production, the wealth of the nation (as
in Adam Smith’s Wealth of Nations, 1776) would grow.
Many issues can be raised with this analysis, but let me focus
on two as these relate to the U.S.-Mexico border.
•The issue of “Public Goods”.
What if Mexican immigrants use public goods (education,
health, public parks) in excess of what they contribute to tax
revenues to fund these goods? An interesting paper by
Amuedo-Dorantes and Bansak (2009) looks into this issue and
finds little evidence for this concern in California. In Texas, we
do not have an income tax, so that all consumers are subject
to taxation (e.g., sales taxes), regardless of immigration status.
Along the Texas-Mexico border, Mexican national consumers
contribute greatly to tax revenues (restaurants, hotels, etc.),
yet they receive relatively few American public goods.
•The issue of wage impact along the Texas-Mexico border.
The Texas-Mexico border resident is relatively young and has
relatively low-levels of education. So labor along this region
is more likely to be a substitute for Mexican immigrant labor
and thus more likely adversely impacted by Mexican
immigrant labor. The research evidence does not support
this idea (Dávila and Mattila, 1985, Dávila, Mora and Molina
2008). As noted before in this presentation, many Mexican
immigrants move to areas outside of the border region and
geographic wage convergence (labor mobility, capital
mobility, and “consumer” mobility) serves to mitigate wage
differentials across regions.
Who among Mexican immigrants come to the U.S., the “best”
or the “worst”?
•According to an early seminal paper by Barry Chiswick (1976),
immigrants are the “best” from their native countries because
the migration decision is costly in both pecuniary and nonpecuniary terms and is therefore taken by the most motivated
and able. He provided evidence of the higher innate skills of
immigrants versus natives using the U.S. Census which
suggested that the earnings of immigrants overtook those of
natives after about 15 years of working in the U.S.
•Chiswick’s work thus suggests the U.S. receives the “best”
Mexican immigrants.
•This view was challenged by George Borjas (1994). He used a
theory developed by Roy (1950) to theoretically show that the
answer to question of “immigrant quality” depends on which
country the immigrant comes from.
• The “Roy Model” application to immigration predicts that the U.S.
receives the “best” immigrants from developed countries with
welfare states: high-ability immigrants from these countries stand
to earn more in the U.S. than in their home countries, while the
“worst” in these countries are better off there as they are
subsidized by the welfare state.
• In low developed countries with weak welfare states, on the
other hand, the “worst” of the natives will find more migration
benefits in coming to the U.S., a country with a relatively stronger
welfare state. By the same token, immigrants with weak welfare
states stay at home as their high incomes are not used to subsidize
welfare.
•Given that Mexico has a weaker welfare state than the U.S.(and
is a less developed country), Borjas’ work would predict that the
U.S. receives the “worst” Mexican immigrants.
•Borjas tracks “synthetic cohorts” using Census data and
finds that immigrants who came to the U.S. (mostly
European) in the early to mid-1900s fared better than more
recent immigrants (many from Mexico).
•But what does the most recent literature suggest?
Chiquiar and Hanson (2005) argue, using the case of Mexican
immigrants, that the Roy Model’s predictions change if it is
assumed that migration costs fall as the innate ability of
immigrants rises. Thus, theoretical argument presented by Borjas
is mitigated by this possibility and Mexican immigrants are also
drawn from the “best” of their native population. They provide
empirical support for their proposition.
Recently, Marie Mora and I (2008) published a paper that takes
some of these ideas to explore the relative quality of Mexican
immigrant entrepreneurs along the U.S.-Mexico border.
•What impact does restrictive immigration policy
have on the future of the economic development
along the U.S.-Mexico border?
Our findings suggest that these types of
immigration policies might be problematic in this
regard.
Any questions?