While recent literature has pointed out that migrants’ remittances have a
positive impact on savings with financial institutions, findings with respect
to access to and the use of loans have been ambiguous. This paper investigates
whether the reception of remittances facilitates taking up loans from formal
or informal sources among Mexican households and finds positive and
statistically significant effects of remittances on borrowing and on the
existence of debts. We address methodological concerns of selection bias and
reverse causality through household fixed effects and an instrumental strategy
that exploits distance to train lines and labor market conditions in the US as
exogenous determinants of remittances
