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Mexican Migration, Great Moderation, Texas Economy, Finn Kydland Focus of Dallas Fed Report

For Immediate Release: June 26, 2008

DALLAS—The latest issue of the Federal Reserve Bank of Dallas' Southwest Economy features articles on Mexican migration, the Great Moderation, the Texas economy and Nobel Prize-winning economist Finn Kydland.

Find the May/June issue at

In “Mexican Migrants Stay in Border Comfort Zone,” senior research economist and advisor Pia Orrenius and Agnes Scott College associate professor of economics Madeline Zavodny find that many Mexican migrants prefer staying close to home despite lower wages found along the border.

Border migrants earn 16 percent less than interior migrants, the authors state. Much of the wage difference is due to the high concentration of female migrants along the border, who earn 41 percent less than male migrants with similar characteristics.

“In sum, the need for fewer migrant networks and a desire for proximity to Mexico probably outweigh the wage penalty in border migrants’ minds and help account for their concentration in these areas,” the authors write.

Job growth stabilized quickly across nearly all of the country in the mid-1980s; however, Texas' transition to more-stable job growth was delayed by fallout from the 1986 oil bust, according to “A Regional Perspective on the Great Moderation.”

The authors— vice president and senior policy advisor Evan Koenig and economic analyst Nicole Ball—state that over the years, Texas has come to look more like the rest of the nation in terms of industries that drive fluctuations in its employment. However, Texas job growth still has an unusually low correlation with national growth.

Of the nine Census Bureau divisions, the South Atlantic—extending from Delaware to Florida—shows the highest correlation with national employment, the authors state.

This issue’s “Regional Update” finds Texas economic growth may remain tepid until 2009.

The energy sector is still the single most prominent source of economic strength, with rig counts hovering near 20-year highs. Real Texas exports were robust in the first quarter, growing 3.9 percent, a substantial increase over fourth quarter 2007.

In an “On the Record” conversation, Dallas Fed consultant Finn Kydland discusses the groundbreaking research that won him the Nobel Prize for economics in 2004.

Kydland’s work with Edward C. Prescott in the mid-to-late 1970s showed how to “put people into economic models and therefore policy.”

“We were explicit about the decisions facing rational people,” Kydland said. “Many of the most important decisions are very forward-looking—accumulating human capital, buying long-term bonds and so on. We included these kinds of decisions in our models.”


Media contact:
James Hoard
Federal Reserve Bank of Dallas
Phone: (214) 922-5307