The sign of worker remittances in growth regressions is heavily disputed in the literature. Comparing two growth regressions with different signs for the remittance variable we show that collinearity with the lagged dependent variable might indicate that collinearity should be investigated comprehensively and might lead to a change in specifications which differ in the variance inflation factors (VIF). In our case the variance inflation factor for remittances depends on the use of a five or one-year lag of the lagged dependent. In the regression with a VIF below ten, the standard critical value, the sign of remittances is positive.
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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.
Find related papers by JEL classification: F24 - International Economics - - International Factor Movements and International Business - - - Remittances O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
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Durlauf, Steven N. & Johnson, Paul A. & Temple, Jonathan R.W., 2005.
"Growth Econometrics,"
Handbook of Economic Growth,
in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 8, pages 555-677
Elsevier.
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