Migration, business formation, and the informal economy in urban Mexico

Connor M. Sheehan, Fernando Riosmena

Research output: Contribution to journalArticlepeer-review

21 Scopus citations


Although the informal economy has grown rapidly in several developing nations, and migration and informality may be related to similar types of credit constraints and market failures, previous research has not systematically attempted to identify if migrant households are more likely to start informal and formal businesses alike and if this association varies across local contexts. We examine the relationship between prior US migration and the creation of both formal and informal businesses in urban Mexico using several criteria to indirectly assess sector location. We use data from 56 communities from the Mexican Migration Project to estimate multilevel survival and nonmultilevel competing risk models predicting the likelihood of informal, formal, and no business formation. The recent return migration of the household head is strongly associated with informal business creation, particularly in economically dynamic areas. On the other hand, migrants are only marginally more likely to start formal businesses in highly economically dynamic sending areas.

Original languageEnglish (US)
Pages (from-to)1092-1108
Number of pages17
JournalSocial Science Research
Issue number4
StatePublished - Jul 2013
Externally publishedYes


  • Business formation
  • Development
  • Informal sector
  • International migration
  • Mexico
  • United States

ASJC Scopus subject areas

  • Education
  • Sociology and Political Science


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