On the Joint Consumption and Labour Supply Effects of Migration on those Left Behind

Previous literature has investigated the effect of migration on remaining household members’ consumption or labour supply, but has rarely examined them jointly. When migration increases consumption but reduces leisure time, one needs a specific framework to draw a conclusion about the overall impact on welfare. I propose such a new approach and test its theoretical implications using household panel data from rural Mexico. The results reveal that adjusting for leisure costs reduces the net welfare gain of migration by one fourth relative to what the consumption gain would suggest.