International migration and business formation in Mexico

Objective. Prior studies yield the pessimistic conclusion that international migration does not promote entrepreneurial activity and business formation. Through a careful quantitative analysis, we seek to show that international migration plays a more positive role in promoting economic development than is generally thought. Methods. Using data gathered in thirty Mexican communities and U.S. destination areas, we follow male household heads over the course of their lives and estimate an event-history model that uses personal resources, household assets, community characteristics, local market potential, and macroeconomic conditions to predict the odds of business formation. We estimate other models to predict the kind of business formed and the number of workers employed. Results. The receipt of U.S. earnings by households and communities significantly increases the odds of business formation and productive investment. Conclusions. The fact that migrant-owned businesses are generally small retail ventures that generate little employment reflects generalized conditions of opportunity in Mexico, not a debility resulting from the migration process itself. U.S. migration is an important factor promoting business formation by migrants and nonmigrants alike.