Strategic Interactions in Migration Decisions in Rural Mexico

Given the economic significance of migration and its relevance for policy, it is important to understand the factors that cause people to migrate. We add to the literature on the determinants of migration by examining whether strategic interactions matter for migration decisions. There are several reasons why a household's migration decisions may depend on the migration decisions of its neighbors, including migration networks and information externalities. Using instrumental variables to address the endogeneity of neighbors' decisions, we empirically examine whether strategic interactions in migration decisions actually take place in rural Mexico, whether the interactions depend on the size of the village, and whether there are nonlinearities in the strategic interactions. Our results show that there is a significant and positive own migration strategic effect. In our base case specification, an increase of 0.1 in the fraction of neighbors with new migration to the US increases a household's probability of new migration to the US by around 13 percentage points, while an increase of 0.1 in the fraction of neighbors with new migration to other states within Mexico increases a household's probability of migration to other states within Mexico by around 9.5 percentage points. We also find that strategic interactions vary non-linearly with village size