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Worker remittances and government behaviour in the receiving countries

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  • Thomas H.W. ZIESEMER

    () (Department of Economics, Maastricht University, and UNU-MERIT, Netherlands)

Abstract

We estimate the impact of worker remittances on savings, taxes, and public expenditures on education, all as a share of GDP, for two samples of poor and less poor countries. Remittances increase the savings ratio in both samples. Savings have an (inverted) u-shaped impact on the tax ratio in poor (richer) countries. Higher tax revenues lead to higher public expenditure on education in both samples. When remittances increase, in the richer sample, governments raise less tax revenues but spend more on education in direct response, whereas governments of the poorer sample raise more tax revenues at low levels of remittances, but less at high levels of remittances. In simultaneous equation simulations of a positive permanent shock to remittances, the governments of richer countries reduce taxation and public expenditure on education as a share of GDP. In poor countries, this leads to higher tax revenues and spending of more money on education.

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File URL: http://ejes.uaic.ro/articles/EJES2012_0302_ZIE.pdf
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Bibliographic Info

Article provided by Centre for European Studies, Alexandru Ioan Cuza University in its journal Eastern Journal of European Studies.

Volume (Year): 3(2) (2012)
Issue (Month): (December)
Pages: 37-59

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Handle: RePEc:jes:journl:y:2012:v:3:p:37-59

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Keywords: remittances; savings; tax revenues; public expenditure on education;

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References

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  1. Ziesemer, Thomas, 2009. "Collinearity in growth regressions: The example of worker remittances," UNU-MERIT Working Paper Series 020, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  2. Ziesemer, Thomas, 2008. "Worker remittances and government behaviour in the receiving countries," UNU-MERIT Working Paper Series 029, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  3. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July.
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  7. Freund, Caroline & Spatafora, Nikola, 2005. "Remittances : transaction costs, determinants, and informal flows," Policy Research Working Paper Series 3704, The World Bank.
  8. Griffin, Keith, 1970. "Foreign Capital, Domestic Savings and Economic Development," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 32(2), pages 99-112, May.
  9. Ziesemer, Thomas, 2009. "The Impact of the Credit Crisis on Poor Developing Countries: Growth, worker remittances, accumulation and migration," UNU-MERIT Working Paper Series 026, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  10. Augustin Kwasi Fosu, 2011. "Optimal public investment, growth, and consumption: Evidence from African countries," Economics Series Working Papers WPS/2011-22, University of Oxford, Department of Economics.
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  12. Christian EBEKE, 2010. "Remittances, Value Added Tax and Tax Revenue in Developing Countries," Working Papers 201030, CERDI.
  13. Ziesemer, Thomas, 2008. "Worker remittances, migration, accumulation and growth in poor developing countries," UNU-MERIT Working Paper Series 063, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  14. Richard Blundell & Steve Bond, 1995. "Initial conditions and moment restrictions in dynamic panel data models," IFS Working Papers W95/17, Institute for Fiscal Studies.
  15. Ziesemer, Thomas, 2012. "The impact of development aid on education and health: Survey and new evidence from dynamic models," UNU-MERIT Working Paper Series 057, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  16. Desai, Mihir A. & Kapur, Devesh & McHale, John & Rogers, Keith, 2009. "The fiscal impact of high-skilled emigration: Flows of Indians to the U.S," Journal of Development Economics, Elsevier, vol. 88(1), pages 32-44, January.
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  18. Yasser Abdih & Ralph Chami & Christian Ebeke & Adolfo Barajas, 2012. "Remittances Channel and Fiscal Impact in the Middle East, North Africa, and Central Asia," IMF Working Papers 12/104, International Monetary Fund.
  19. Dominik H. Enste & Friedrich Schneider, 2000. "Shadow Economies: Size, Causes, and Consequences," Journal of Economic Literature, American Economic Association, vol. 38(1), pages 77-114, March.
  20. Ziesemer, Thomas, 2011. "What Changes Gini Coefficients of Education? On the dynamic interaction between education, its distribution and growth," UNU-MERIT Working Paper Series 053, United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology.
  21. Christian Hubert Ebeke, 2011. "Do Remittances Lead to a Public Moral Hazard in Developing Countries? An Empirical Investigation," The Journal of Development Studies, Taylor and Francis Journals, vol. 48(8), pages 1009-1025, May.
  22. Osili, Una Okonkwo, 2007. "Remittances and savings from international migration: Theory and evidence using a matched sample," Journal of Development Economics, Elsevier, vol. 83(2), pages 446-465, July.
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Cited by:
  1. Thomas H.W. ZIESEMER, 2012. "Worker remittances and government behaviour in the receiving countries," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 3, pages 37-59, December.
  2. Christian Ebeke, 2011. "Transferts des migrants, ouverture sur l'extérieur et dépenses publiques dans les pays en développement," Working Papers halshs-00552983, HAL.

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