Output growth volatility and remittances
AbstractSince output growth volatility has negative effects on growth, poverty and welfare, especially in poorer countries, it is crucial to identify the country-specific factors that affect it. The empirical literature has focused mostly on financial development, policy distortions and globalization variables. Among the latter, attention has been directed in particular to trade and financial openness. We contribute to this literature by adding what we see as the missing globalization variable, the one related to the increasingly important phenomenon of international migrations, namely emigrants' remittances. Remittances can help reduce output growth volatility thanks to their considerable magnitude, stability and low pro-cyclicality. Applying an empirical framework taken from the existing literature to a sample of about 60 emerging and developing economies over the period 1980-2003, we provide robust evidence that remittances are negatively correlated to output growth volatility. Instrumental variable estimation supports our intuition about the direction of causality.
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Bibliographic InfoPaper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 673.
Date of creation: Jun 2008
Date of revision:
output growth volatility; workers’; remittances; compensation of employees; financial development; trade and financial openness;
Other versions of this item:
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- F22 - International Economics - - International Factor Movements and International Business - - - International Migration
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
- O1 - Economic Development, Technological Change, and Growth - - Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-07-30 (All new papers)
- NEP-MAC-2008-07-30 (Macroeconomics)
- NEP-MIG-2008-07-30 (Economics of Human Migration)
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