Abstract
This paper analyzes the effect of aid on international and domestic migration and explores the causal effect of income on migration. The theoretical model predicts that the effect of aid on migration is ambiguous, depending on both the size and type of transfers. For some household types, e.g., those that are credit constrained, conditional transfers, where the potential recipient has to comply with some requirement in order to qualify for eligibility, may decrease contemporaneous migration but increase future migration. In contrast, unconditional grants may increase the level of migration at all times. Randomized data from a Mexican development program, Progresa, are used to test these hypotheses. The empirical analysis verifies that unconditional transfers increase current migration, while conditional transfers reduce it. Overall, the program generates an increase in international migration but no change in domestic migration.
Published Version
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