The relationship between remittances and crime in Mexico

by Guest bloggers, René Osorio and Steve Brito

399px-CelaPhoto courtesy of Wikimedia Commons, User Dantadd

It is difficult to find any Mexican who does not have friends or family living in other countries. And one of the key features shared by Mexicans who live in the United States is that they send billions of dollars to their native country every year.

Remittances received in Mexico amount to 2.1 percent of the country’s GDP. Mexico receives about 40 percent of all the remittances sent to Latin America and the Caribbean.

Beyond what we already know about the impact of remittances on the economy in general,  we can ask what is their impact on crime. In the working document “Remittances and the Impact on Crime in Mexico” we ask ourselves the question: Do remittances help to fight crime?

We found that yes, remittances can help to combat crime. Using a system of variable instruments, we were able to confirm that Mexican municipalities that have a higher percentage of homes receiving remittances do have lower rates of homicides and street robberies.

Specifically, for every additional percentage point of homes that receive remittances, the homicide rate drops by .05 percent and street robberies drop by .19 per cent.

The use of variable instruments is important to confirm the causal impact of remittances on crime and not the other way around, since it’s possible that crime could force people to avoid sending remittances to places where criminals can kidnap and extort residents.

As variable instruments, we used railroad lines installed in 1920, which were used by Mexicans emigrating to the United States and therefore are linked to immigration patterns. Those railroad lines are therefore also  linked to patterns of remittances but are unrelated to the current levels of crime in Mexico.

How can remittances help to reduce crime? One clear way is that remittances reduce poverty, which in turn helps to reduce the levels of crime. Other ways may be less evident. We know, for example, that remittances can finance businesses that can provide jobs and that students spend more time in school if their families receive money from abroad.

So if we know all of this, how can we put remittances to use combating crime? Programs that lower the cost of the transfers of remittances could focus on municipalities with high crime rates by collaborating with remittance delivery agencies. Micro-enterprises financed with remittances could be asked to hire youths at risk of falling into the hands of organized crime.

These are just some ideas. But we know from this working paper that remittances can help the search for solutions to crime in countries where it is common to have relatives who live abroad.

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René Osorio has a doctorate in economics from Boston University, a master’s in applied macroeconomics from the Pontificia Universidad Católica in Chile and a civil engineering degree from the National Engineering University in Nicaragua. He currently works as a consultant specializing in fiscal  issues in the Fiscal and Municipal Management Division of the IDB, where he has participated in a variety of projects related to legal identity, migration and citizen security, gender and taxation and the quality of fiscal policies in Latin America and the Caribbean.

Steve Brito is an economist who works on issues of productivity, labor markets, economic development, migration and citizen security. He currently works as a consultant in the Labor Markets and Social Security Unit of the IDB. He has a master’s degree in economics from the Pontificia Universidad Católica in Chile and a degree in economics and finances from the Francisco Marroquín University. He was a fellow at the Francisco Marroquín University and the Organization of American States.


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