Remittances to Mexico: Why Were They So Resilient During the Pandemic?

Contrary to expectations, remittances to Mexico from the United States grew markedly during the COVID-19 pandemic. This study examines the causes of this rapid and sustained remittance growth, focusing specifically on the evolution of state level employment in the U.S. and changes in how remittances are sent to Mexico. This study contributes to the existing literature by extending the analysis over a broader time frame, incorporating U.S. state-level employment by industry, and introducing additional variables to explore the transition from informal to formal remittance channels. Using panel data regression, I find that both U.S. employment and increased use of formal remittance channels played a significant role. In the short-run, the shift from informal to formal remittance channels was the main driver. However, in the long-run, employment in the construction, agriculture, and hospitality industries played a more dominant role. These results are robust to alternate methodologies. The historical relationship between remittances and the relative strength of the U.S. and Mexican economies holds true in this context. At the same time, the pandemic introduced new dynamics, thus expanding our understanding of remittance growth and transmission patterns.