Abstract

This paper presents evidence of the effect of the recent phases of the business cycle in Spain and United States, proxied by their respective unemployment rates, on the labor market of Colombian cities with high migration tradition. These countries are the main destination for Colombian labor migrants. By using information from the household survey between 2006 and 2011 for urban areas in Colombia and a differences-in-differences approach, we find that unemployment rates of those countries negatively affect the probability of receiving remittances and the amount received by Colombian households living in areas with high and moderate migration tradition. In a second stage, we provide evidence that unemployment rates of those countries positively affect labor force participation decisions in Colombian regions with the highest migration tradition.

Highlights

  • International labor mobility affects economies in a myriad of dimensions

  • We do not find any results on household size, indicating that any effect we find on the labor force participation decisions should be driven mainly by remittances sent by migrants

  • Results in the first row of panel A.1 of Table 3 indicate that a 1 percentage point increase in the Spanish unemployment rate reduces the probability of receiving remittances in municipalities with high emigration rate (Treat H) by 0.13–0.15 % points, relative to control municipalities and by 0.17–0.18 % points in municipalities with moderate emigration rates (Treat M)

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Summary

Introduction

Considering the migrants’ country of origin, migration affects labor supply composition in terms of human capital and skills, wages in local markets, asset accumulation, exchange rate movements, and reception of remittances. The latter are potential determinants of schooling and labor market decisions of non-migrants ( Fajnzylber and López 2008; Medina and Cardona 2010; Cárdenas et al 2010). Migration itself, irrespective of the presence of remittances, can affect the labor-leisure decisions of secondary workers in the household, given that some of them may have to take the place of the migrant to compensate the income she previously provided. At the end, the effects of migration and remittances can compensate or mitigate each other

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