Relative Deprivation, Wage Differentials and Mexican Migration

Abstract

This paper constructs and tests a model that incorporates relative deprivation into the migration decision. Relatively deprived individuals view their situations as less than a community standard. Another innovation of this paper is the utilization of a cluster approach to wage differentials. This cluster method takes account of individual characteristics while avoiding the severe multicollinearity problems inherent in the standard wage equation approach. Using data from the Mexican Migration Project, relative deprivation is found to be a significant motivating factor in domestic migration decisions. The results also suggest that Mexico-US migration may be increasing relative deprivation in Mexican communities. For policymakers, the results indicate that policies attempting to slow domestic rural-to-urban migration must address both relative and absolute outcomes in communities. Investments in communities that raise aggregate incomes, but increase relative deprivation, could result in an increase in migration out of the community, not in a decrease as intended.