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Can lower remittance costs improve human capital accumulation in Africa?

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  • Khraiche, Maroula
  • Boudreau, James

Abstract

To evaluate gains in human capital accumulation from reduction in remittance prices, this study constructs a general equilibrium model in which the choices to invest in human capital and to migrate are endogenous. The model is calibrated for a group of eight African economies which offer student loans, and the effect on human capital accumulation of decreasing the remittance price to the level recommended by the United Nations (3%) is numerically derived. It is found that reduction in remittance prices alters the decisions of households, leading in the aggregate to a decrease in interest rates, a curbing of the desire to migrate, and an increase human capital. Hence, the study offers the policy prescription that governments, both in nations where remittances originate and in those to which funds are sent, must continue to lower remittance prices, by, for example, improving access to mobile banking, especially since such policies are relatively immune to economic shocks.

Suggested Citation

  • Khraiche, Maroula & Boudreau, James, 2020. "Can lower remittance costs improve human capital accumulation in Africa?," Journal of Policy Modeling, Elsevier, vol. 42(5), pages 1000-1021.
  • Handle: RePEc:eee:jpolmo:v:42:y:2020:i:5:p:1000-1021
    DOI: 10.1016/j.jpolmod.2020.04.005
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    More about this item

    Keywords

    Migration; Credit; Human Capital; Brain drain; Brain gain;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • D91 - Microeconomics - - Micro-Based Behavioral Economics - - - Role and Effects of Psychological, Emotional, Social, and Cognitive Factors on Decision Making

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