Remittance Income Volatility and Labor Supply in Mexico

Using the 2000 through 2008 waves of the Encuesta Nacional de Ingresos y Gastos de los Hogares (ENIGH), Mexico's income and expenditure survey, we estimate the way in which volatility surrounding the inflows of international remittances impacts male and female labor supply. We find that male and female labor supply decreases with higher levels of remittance income. Additionally, increases in remittance income volatility raise the employment likelihood of men and women, as well as the hours worked by employed women. Since men are more likely than women to be employed full‐time, women may be better suited to respond to increased volatility in remittance income by raising the number of hours worked. Overall, the findings are suggestive of labor supply being used as a buffer against income shortfalls and increased volatility in remittance inflows.