The Dynamic Migration Game: A Structural Econometric Model and Application to Rural Mexico

The migration decisions of households in a village can be thought of as a dynamic game in which each household makes decisions about how to allocate its members across distinct activities, taking into account dynamic... [ view full abstract ]

The migration decisions of households in a village can be thought of as a dynamic game in which each household makes decisions about how to allocate its members across distinct activities, taking into account dynamic considerations about the future and strategic considerations about what neighbors in the village are doing. We develop and estimate a structural econometric model of this dynamic migration game, and apply it to households in rural Mexico. The structural econometric model enables us to examine how natural factors, economic factors, institutions, government policies, and strategic interactions affect household migration decisions. We use the estimated parameters to simulate the effects of counterfactual policy scenarios, including those regarding wages, schooling, crime rates at the border, precipitation, and government policy, on migration decisions and welfare.   Results show that, owing in part to strategic interactions and dynamic behavior, a cap on total migration to the US decreases migration not only to the US but also within Mexico as well, causes migration to the US to decrease by more than what was required by the policy, and decreases average welfare per household-year.