Can Remittances Spur Economic Growth and Development? Evidence from Latin American Countries (LACs)
AbstractFor the last five decades, there have been heated debates on the sources of economic growth in developing economies. The perceived factors of economic growth have ranged from surplus labor to investment in human and physical capital, transfer of technological change, overseas development assistance, flow of private capital, increasing returns from investment in new ideas and research and development. The impacts of the above listed traditional sources of economic growth have been well documented in literature. Researchers have also considered the importance of institutional factors such as the role of political freedom, political instability, voice and accountability on economic growth and development. Despite the increased size of remittances in the total international capital flows, however, the relationship between remittances and economic growth has not been adequately studied. This study explores the aggregate impact of remittances on the economic growth of 18 Latin American Countries within the conventional neoclassical growth framework using an unbalanced panel data spanning from 1980 to 2005. We find that remittances have a positive and significant effect on the growth of Latin American Countries where the financial systems are less developed by providing an alternative way to finance investment and helping overcome liquidity constraints.
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Bibliographic InfoPaper provided by Middle Tennessee State University, Department of Economics and Finance in its series Working Papers with number 201006.
Date of creation: Mar 2010
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Web page: http://www.mtsu.edu/~berc/working/Economics_Working_Papers.html
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Workers’ Remittances; Economic Growth; Panel Data; Arellano-Bond; Latin American Countries;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-03-13 (All new papers)
- NEP-FDG-2010-03-13 (Financial Development & Growth)
- NEP-MAC-2010-03-13 (Macroeconomics)
- NEP-MIG-2010-03-13 (Economics of Human Migration)
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