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Remittances and Inequality: A Dynamic Migration Model

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  • Frédéric Docquier

    (CADRE, University of Lille 2; and IZA Bonn, Germany)

  • Hillel Rapoport

    ()
    (CREDPR, Department of Economics, Stanford University; CADRE; and Bar-Ilan University)

Abstract

We develop a model of the interdependencies between migration, remittances and inequality, and investigate how migration and subsequent remittances affect inter-household inequality in the origin communities. An important feature of our model is that we take into account the impact of migration on the local (rural) labor market. Migration is shown to decrease wealth inequality but may generate higher income inequality. Moreover, the short-run and long-run impacts of migration on income inequality may also be of opposite signs, suggesting that the dynamic relationship between migration and inequality may well be characterized by an inverse U-shaped pattern. This is consistent with the findings of the empirical literature on remittances and inequality, but offers a different interpretation, with no need to endogenize migration costs through the role of migrant networks.

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File URL: http://www.biu.ac.il/soc/ec/wp/5-03/5-03.pdf
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Bibliographic Info

Paper provided by Department of Economics, Bar-Ilan University in its series Working Papers with number 2003-05.

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Date of creation: Jun 2003
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Handle: RePEc:biu:wpaper:2003-05

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Postal: Faculty of Social Sciences, Bar Ilan University 52900 Ramat-Gan
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Web page: http://econ.biu.ac.il
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Keywords: Migration; remittances; inequality;

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References

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  1. Abhijit V. Banerjee & Andrew F. Newman, 1990. "Occupational Choice and the Process of Development," Discussion Papers 911, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
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