Essays on Migration and Agricultural Development

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The economic consequences of international migration have spurred vigorous debates among policy makers. There also are discussions within the economics literature, with labor economists disagreeing on whether immigration is beneficial for host economies and development economists having dissenting views about the impact of emigration and remittances on source countries. In this dissertation I make a contribution to both academic debates.

The two empirical studies in the dissertation are motivated by a core result of the Hecksher-Olin theory which states that open economies can absorb factor supply shocks by adapting their technology and output mix, thereby attenuating the effects of the shocks on factor prices. I investigate if local agricultural economies adapted their crop and technology mix in response to migration-induced changes in the availability of factors. In order to identify the causal effects of migration-induced shocks on agriculture, an empirical strategy that combines regional-level fixed effects with instrumental variables is used. The instruments are constructed exploiting within-country variation in the historic location choices of migrants as well as arguably exogenous national shocks to migration.

In the second chapter I investigate the question in the context of a migrant sending economy, the Philippines, and derive causal province-level estimates of the effects of emigration and remittance flows on measures of the size of agriculture and the use of capital-intensive farming practices. I also estimate the effects on the adoption of risk-coping mechanisms since remittances may play an insurance role. I provide evidence that remittances have transformed farming practices, increasing the degree of specialization, the production of high value commercial crops and the adoption of mechanized farming. These effects seem to be driven by an increase in the availability of working capital and the provision of insurance. In contrast, I find no evidence that emigration has an impact on farming practices, something that can be explained by the absence of hiring constraints and the existence of a highly elastic labor supply. Overall, the findings suggest that, to the extent that agricultural production in most developing countries is limited by insurance and capital constraints and not by labor shortages, remittances can be a source of insurance and investment finance that fosters agricultural development.

The third chapter is a study of adjustments to immigration-induced changes in labor supply in a host economy, written in collaboration with Jeanne Lafortune and Jose Tessada. In contrast to the Philippines' study, we find an impact of early 20th century labor supply shocks on agricultural practices in the United States, something that can be explained by the fact that the US, as opposed to the Philippines, is a land-abundant country. We find that an immigration-induced increase in farm labor led to changes in crop choice and in several measures of production organization such as farm size, tenancy and use of tractors and animal traction. We also study effects on input mix and land and capital productivity which, according to a simple theoretical framework, will provide insights about the wage effects of immigration. Overall, our results suggest that even though the US agricultural sector adapted to an increase in labor supply through output and technological adjustments, such adjustments were insufficient to mitigate the wage effects of immigration.