and distance.<sup>9</sup> In this sense, municipalities closer to the border were more likely to receive a higher share of not only formal but also informal remittances than those farther away.

Second, we employ migration patterns of Mexicans from northern states (Fig. 2) to show they were more likely to migrate to southern US states between 2016 and 2019, whereas those from states in southern Mexico do not show a clear pattern.<sup>10</sup> However, geographic mobility declined dramatically in March 2020. As seen in panel B of Figure 1, the number of border crossings between Mexico and the United States dropped by 70 percent in April 2020 compared to April 2019. As a comparison, border crossings between 2007 and 2008 fell by only about five percent. The decline in mobility since March 2020—not only at the border but also within the United States and Mexico—implies that informal remittance channels suddenly shut down. As a result, municipalities closer to the US border that received remittances through informal networks would be disproportionately more likely to experience a shift from informal to formal channels, and recorded remittances would be more likely to increase. Descriptive patterns of remittance flows across municipalities since March 2020 align with the shift towards formal channels, as northern Mexican municipalities and southern US states experienced disproportionate increases in this type of remittance flow.<sup>11</sup> Several articles have assessed geographic mobility and distance as important variables that affect the level of remittances (Frankel, 2011; Docquier et al., 2012; Lueth and Ruiz-Arranz, 2008). However, to disentangle the role of distance, it is necessary to use subnational or individual-level data, which enable us to control for unobservable factors that might affect cross-country regressions. Evidence that uses such data is scarce. Exceptions include Ferriani and Oddo (2019), who use data on official remittances from institutions or other authorized intermediaries (MTOs, banks, and post offices) at the provincial level in Italy. They find a strong positive correlation between remittance outflows to other countries and the cost of travel to such countries, which is heavily driven by distance. The authors interpret this finding as evidence of the importance of informal remittances when the distance between recipients and senders is shorter. Similarly, Simpson and Sparber (2020) use the US Current Population Survey (CPS) to estimate the determinants of household remittances abroad using household surveys, which include both channels. They find that a 10 percent increase in distance reduces the probability of remitting by 4.7 percentage points. In other words, these findings accord with the notion that distance increases the total costs of sending remittances but reduces the relative cost of sending them through formal channels relative to informal ones.

> 9See Table A2 in the Appendix. Before the pandemic, the elasticity of formal (official) remittances and distance was -0.50 and the elasticity between total (formal and informal) remittances and distance was -0.75. Although the difference between the two coefficients is not statistically significant at the conventional levels ( _p-_ value = 0.14), the magnitude of the difference is economically relevant. 10See Figure A2 for migration patterns during the 2002–2020 period. 11See Figures A3, A4, A5, and A6 in the Appendix.

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