How do migration and remittances affect inequality? A case study of Mexico

The poverty-reducing effects of remittances have been well documented; however, their effects on inequality are less clear. This paper examines the impact of remittances on inequality in Mexico using household-level information on the receiving side. It hopes to speak to their insurance role by examining how remittances are affected by domestic and external crises: the 1994 Mexican peso crisis and the global financial crisis. We find that remittances lower inequality and that they become more pro-poor over time. This also strengthens their insurance effects, mitigating some of the negative impact of shocks on the poorest.