Why Bahar and Hausmann Tell Us Nothing About Venezuelan Migration Flows to the United States

TL;DR

This paper critiques Bahar and Hausmann's claim that oil sanctions do not increase Venezuelan migration to the US, showing their statistical method is flawed and leads to false conclusions.

Contribution

It demonstrates the importance of correct cointegration testing methods, revealing that previous findings were based on misspecified tests and are invalid.

Findings

Incorrect application of cointegration tests leads to false positives.

Proper testing shows no evidence of a relationship between oil revenues and migration.

Misinterpretation of statistical methods can mislead policy conclusions.

Abstract

Bahar and Hausmann (2025a) claim to find evidence against the hypothesis that oil sanctions on Venezuela lead to increased migration flows to the United States. We show that their findings derive from applying a nonstandard, misspecified Engle-Granger test to first differences. This specification is incorrect because cointegration tests are designed to evaluate relationships between the levels of variables, not their first differences. Since the residuals from regressions of I(0) variables will, under general conditions, be stationary, testing for cointegration between first differences of I(1) variables virtually ensures a spurious finding of cointegration. Using Monte Carlo simulations, we show that the misspecified Bahar-Hausmann test on first differences exhibits a false positive rate of 100 percent. Once the Engle-Granger test is applied correctly to the logarithms of levels, the evidence of cointegration vanishes. The Bahar-Hausmann regressions therefore provide no valid basis for inference about any underlying relationship between migration and Venezuelan oil revenues.