Taking One for the Team: Shocks at Destination and Households’ Supply of Migrants∗

We study how migration decisions of Mexican households respond to unemployment shocks in the U.S. We emphasize the role played by households (as opposed to individuals) as the decision-making units at origin. We show that Mexican families with members working abroad (exposed families) respond to negative economic shocks in the U.S. in a heterogeneous fashion. Poor families react by sending additional members, while richer families respond by returning their members. We argue that this heterogeneous response is driven by the relative magnitudes of income and substitution effects after a negative shock in the U.S. While the income effect dominates the substitution one for poor households, the opposite holds for richer households. These results are also informative to the literature on selection patterns in international migration, suggesting a new channel through which negative shocks in the host economy affect negatively the skill composition of subsequent migrants. JEL-Classification: J22, J61, O15, F22