In this paper, we analyse the possible channels through which informality, remittances and migration could interact and consequently affect growth in Mexico. In order to do so, we develop a simple endogenous growth model that allows for remittances and the coexistence of the formal and informal sector in the production function. In the literature, there is no agreement regarding the effects of the informal sector on economic growth. Moreover, thanks to globalization, migration and remittances have increased significantly their macroeconomic weight, renewing interest in studying the interactions that these variables might have, especially in developing countries like Mexico, where remittances are the third source of income after oil and tourism revenues. Our model shows that remittances play a crucial role on enhancing the Mexican resource constraint, while the possibility of migration in the informal sector drains the aggregate labor force. However, the magnitude of potential remittances may offset this loss, thus having an overall positive effect on economic growth.
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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number
8373.
Find related papers by JEL classification: F22 - International Economics - - International Factor Movements and International Business - - - International Migration O17 - Economic Development, Technological Change, and Growth - - Economic Development - - - Formal and Informal Sectors; Shadow Economy; Institutional Arrangements O40 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General F24 - International Economics - - International Factor Movements and International Business - - - Remittances
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