Estimation of state-to-state remittance flows from the US to Mexico

Abstract Remittances from the U.S. to Mexico reached a record $40.6 billion in 2020, providing significant support to the Mexican economy during the COVID-19 pandemic, yet their distribution was notably uneven across regions. Addressing the lack of detailed official subnational data, this study estimates state-to-state remittance flows by constructing an estimated network based on migration flows. These estimates allow us to empirically examine how economic shocks in U.S. states, particularly those occurring during the second quarter of 2020 due to the pandemic, impacted remittance inflows in Mexican states. Our findings reveal significant regional heterogeneity in the effects: remittances from California and Texas showed resilience, benefiting many Mexican states, whereas flows from New York to Puebla experienced a notable decline. Furthermore, simulations exploring a scenario where remittances from California and Texas experienced a reduction equivalent to half the magnitude observed from New York indicate that such a drop would have substantially impacted income in poorer southern and central states like Chiapas and Oaxaca. This case study underscores the need of analyzing remittance flows at subnational level to accurately understand the varied regional economic consequences of shocks like the COVID-19 pandemic.