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Worker Remittances and Growth: The Physical and Human Capital Channels

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  • Ziesemer, Thomas

    () (University of Maastricht, Faculty of Economics)

Abstract

Remittances may have an impact on economic growth through channels to physical and human capital. We estimate two variants of an open economy model of these two channels consisting of seven equations using the general method of moments with heteroscedasticity and autocorrelation correction (GMM-HAC) with pooled data for four different samples of countries receiving remittances in 2003. The countries with per capita income below $1200 benefit most from remittances in the long run because they have the largest impact of remittances on savings. Their remittances account for about 2% of the steady-state level of GDP per capita when compared to the counterfactual of having no remittances. Their ratio of the steady-state growth rates with and without remittances is 1.39. Transitional gains are higher than the steady-state gains only for the human capital variables of this sample. As savings react much more strongly than investment an important benefit of remittances is that less debt is incurred and less debt service is paid than without remittances. The elasticity of the GNI/GDP ratio with respect to the remittance/GDP ratio is .002. All effects are much weaker for the richer countries.

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Bibliographic Info

Paper provided by United Nations University, Maastricht Economic and social Research and training centre on Innovation and Technology in its series UNU-MERIT Working Paper Series with number 020.

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Date of creation: 2006
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Handle: RePEc:dgr:unumer:2006020

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Web page: http://www.merit.unu.edu

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Keywords: remittances; growth; simultaneous equation model;

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Cited by:
  1. Tausch, Arno & Heshmati, Almas, 2011. "Migration, Openness and the Global Preconditions of 'Smart Development'," IZA Discussion Papers 6169, Institute for the Study of Labor (IZA).
  2. Laurent Gheeraert & Ritha Sukadi Mata & Daniel Traca, 2010. "Remittances and Domestic Investment in Developing Countries: An Analysis of the Role of Financial Sector Development," Working Papers CEB 10-013.RS, ULB -- Universite Libre de Bruxelles.
  3. Anupam Das & Murshed Chowdhury, 2011. "Remittances and GDP Dynamics in 11 Developing Countries: Evidence from Panel Cointegration and PMG Techniques," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 14(42), pages 3-23, December.
  4. Garcia-Fuentes, Pablo A. & Kennedy, P. Lynn, 2009. "Remittances and economic growth in Latin America and the Caribbean: The Impact of the human capital development," 2009 Annual Meeting, January 31-February 3, 2009, Atlanta, Georgia 46751, Southern Agricultural Economics Association.
  5. Carlos Vargas-Silva, 2009. "Are Remittances Manna From Heaven? A Look at the Business Cycle Properties of Remittances," Working Papers 0905, Sam Houston State University, Department of Economics and International Business.
  6. Jeffrey A. Edwards & Jennis J. Biser, 2011. "The interactive effect of remittances and civil liberties on investment and consumption," International Journal of Development Issues, Emerald Group Publishing, vol. 10(1), pages 20-33, April.
  7. Hulya Ulku, 2010. "Remitting Behaviour of Turkish Migrants: Evidence from Household Data in Germany," Brooks World Poverty Institute Working Paper Series 11510, BWPI, The University of Manchester.
  8. Miguel Ramirez, 2012. "Do Financial and Institutional Variables Enhance the Impact of Remittances on Economic Growth in Latin America and the Caribbean? A Panel Cointegration Analysis," Working Papers 1202, Trinity College, Department of Economics.

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