Abstract
Based on a survey of participants in Canada's Seasonal Agricultural Workers Program, the authors’ three‐stage least squares estimation of a simultaneous equation model finds that migrants’ remittances enhance on‐farm investments in Mexico, which, in turn, increase farm income. Remittances are also found to have a positive influence on non‐farm income in Mexico, by giving respondents the possibility of starting a new business and diversifying their investments. These results support the hypothesis underlying the “new economics of labour migration” that remittances contribute to economic development by relaxing the credit constraint on the investment function of family farms.