Part of the rationale for the North American Free Trade Agreement was that it would increase trade and foreign direct investment (FDI) flows, creating jobs and reducing migration to the United States. Since poor data on illegal migration to the United States make direct measurement difficult, data on migration within Mexico, where census data permit careful analysis, are used instead to evaluate the mechanism behind predictions on migration to the United States. Specifications are provided for migration within Mexico, incorporating measures of cost of living, amenities, and networks. Contrary to much of the literature, labor market variables enter very significantly and as predicted once possible credit constraint effects are controlled for. Greater exposure to FDI and trade deters outmigration, with the effects working partly through the labor market. Finally, some tentative inferences are presented about the impact of increased FDI on Mexico-U.S. migration. On average, a doubling of FDI inflows leads to a 1.5-2 percent drop in migration.''Mexico wants to export goods, not people.'' -Former Mexican President Carlos Salinas de Gortari Mexican President Carlos Salinas de Gortari promoted the North American Free Trade Agreement (NAFTA) partly on the grounds that it would reduce incentives for Mexicans to migrate north. While this rationale is intuitively appealing, several studies have suggested possible slips ''twixt cup and lip. '' Razin and Sadka (1997) note that dropping the assumption of identical production technologies or permitting increasing returns to scale allows trade and migration to be complements rather than substitutes. 1 Markusen and Zahniser (1999), drawing on models and empirical evidence by Feenstra and
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