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The Impact of the Credit Crisis on Poor Developing Countries: Growth, worker remittances, accumulation and migration

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  • Ziesemer, Thomas

    ()
    (UNU-MERIT, Department of Economics, Maastricht University)

Abstract

The credit crisis of OECD countries has a negative impact on the growth of the world economy according to a simple error correction model. This causes negative growth effects in poor developing countries. The reduced growth has a direct or indirect impact on the convergence issue, aid, remittances, labour force growth, investment and savings, net foreign debt, migration, tax revenues, public expenditure on education and literacy. We estimate dynamic equations of all these variables using dynamic panel data methods for a panel of countries with per capita income below $1200 (2000). The estimated equations are then integrated to a dynamic system of fourteen equations for fourteen variables that allows for highly non-linear baseline simulations for these open economies. Then we analyze the effects of shocks as predicted by the international organizations for the OECD and world growth for 2008 and 2009. Whereas growth rates return to the baseline scenario very quickly, the GDP per capita returns to its baseline level in OECD countries and the world economy after some years but in poor developing countries it remains below the baseline scenario for more than 200 years. This long run blow to convergence leads to more remittances and emigration, a lower labour force growth, higher shares of GDP for saving, tax revenues, public expenditure on education and investment, and higher literacy. However, all these stabilizing forces through remittances and emigration cannot compensate the losses in levels of growth. Short and medium run effects are driven by a return to baseline for OECD and world GDP growth rates by the end of 2010, but for levels only 10 to 30 years later. Therefore we first get 15 to 20 years of fewer remittances, tax revenues, savings, public expenditure on education, literacy, and investment, more emigration and lower labour force growth.

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Bibliographic Info

Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 026.

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Date of creation: 2009
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Handle: RePEc:unm:unumer:2009026

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Keywords: crisis; migration; remittances; accumulation; growth;

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Cited by:
  1. Ziesemer, Thomas, 2012. "Worker remittances and government behaviour in the receiving countries," MERIT Working Papers, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) 065, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  2. Sun, Ruoyan, 2013. "Kinetics of jobs in multi-link cities with migration-driven aggregation process," Economic Modelling, Elsevier, Elsevier, vol. 30(C), pages 36-41.
  3. Gani, Azmat & Al Mawali, Nasser Rashid, 2013. "Oman's trade and opportunities of integration with the Asian economies," Economic Modelling, Elsevier, Elsevier, vol. 31(C), pages 766-774.
  4. Abdilahi Ali & Baris Alpaslan, 2013. "Do Migrant Remittances Complement Domestic Investment? New Evidence from Panel Cointegration," The School of Economics Discussion Paper Series, Economics, The University of Manchester 1308, Economics, The University of Manchester.
  5. Ziesemer, Thomas H.W., 2012. "Worker remittances, migration, accumulation and growth in poor developing countries: Survey and analysis of direct and indirect effects," Economic Modelling, Elsevier, Elsevier, vol. 29(2), pages 103-118.

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