Migrant Self-Selection and Random Shocks: Evidence from the Panic of 1907

Abstract

We study the impact of the 1907 Panic, the most severe economic crisis before the Great Depression, on the selection of Mexican immigration. We find that migrants were positively selected on height before the crisis. This pattern changed to negative selection during the crisis but returned to positive selection afterward. Adjustments in selection were partially mediated by theenganche, a historical labor-recruiting system that reduced migration costs but only for taller laborers with above-average earnings potential. We document that labor recruiting contributed to maintaining the relatively constant height profile of the migration flow in the short run.