The Effects of Declining U.S. Immigration on Local Labor Markets in Mexico

Authors

Gonzalo Ares de Parga-Regalado, Bocconi University, Laboratory for Effective Anti-Poverty Policies
Marta Prato, Bocconi University, Innocenzo Gasparini Institute for Economic Research, and Centre for Economic Policy ResearchFollow

Series

Upjohn Institute working paper ; 26-424

DOI

10.17848/wp26-424

Issue Date

March 2026

Abstract

This paper examines how declining migration opportunities to the United States affect local labor markets in Mexico. Using novel micro-level data from consular identification cards and deportations, we link individuals’ Mexican municipalities of origin to their U.S. destination states. We implement a shift-share design based on historical migration networks and exploit regional variation in exposure to changes in U.S. migration flows between 2017 and 2022 to identify the local labor market effects of reduced emigration while controlling for involuntary repatriations. While we find no impact on overall employment rates, regions more exposed to the decline in migration experience an increase in the share of formal employment and lower formal private-sector wages. These results suggest that reduced migration opportunities expand the labor supply in the formal sector, putting downward pressure on pay.

Sponsorship

W.E. Upjohn Institute for Employment Research Early Career Research Award No. 23-58162-09

Subject Areas

LABOR MARKET ISSUES; Employment relationships; Nonstandard work arrangements; Wages, health insurance and other benefits; INTERNATIONAL ISSUES; Immigration