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Workers' remittances and economic growth in China and Korea: an empirical analysis

  • Syed Tehseen Jawaid
  • Syed Ali Raza

Purpose – This purpose of this paper is to investigate the relationship between workers' remittances and economic growth in China and Korea. Design/methodology/approach – This paper has employed annual time series data over the period of 1980 to 2009. Johansen and Jeuuselius's cointegration technique, error correction model, and sensitivity analysis have been performed to analyze the long-run, short-run relationships and robustness of the results, respectively. Findings – Cointegration results confirm that there exists significant positive long-run relationship between remittances and economic growth in Korea, while, significant negative relationship exist between remittances and economic growth in China. Error correction model confirms the significant positive short-run relationship of workers' remittances with economic growth in Korea, while the results of China were insignificant in short run. Causality analysis confirms unidirectional causality runs from workers' remittances to economic growth, in both China and Korea. Sensitivity analysis confirms that the results are robust. Practical implications – It is suggested that Korea should form friendly policies to ensure the continuous inflows of workers' remittances and their efficient utilization to ensure economic growth. On the other hand, China should keep an eye to reducing voluntary unemployment, which leads to decrease in productivity and growth in the country. Originality/value – The paper provides some empirical evidence of whether workers' remittances have contributed significantly to large open economies.

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Article provided by Emerald Group Publishing in its journal Journal of Chinese Economic and Foreign Trade Studies.

Volume (Year): 5 (2012)
Issue (Month): 3 (December)
Pages: 185-193

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Handle: RePEc:eme:ceftpp:v:5:y:2012:i:3:pp:185-193
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  1. Qayyum, Abdul & Javid, Muhammad & Arif, Umaima, 2008. "Impact of Remittances on Economic Growth and Poverty: Evidence from Pakistan," MPRA Paper 22941, University Library of Munich, Germany.
  2. Archanun Kohpaiboon, 2003. "Foreign trade regimes and the FDI-Growth Nexus: a case study of Thailand," Journal of Development Studies, Taylor & Francis Journals, vol. 40(2), pages 55-69.
  3. Samir Jahjah & Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development," IMF Working Papers 03/189, International Monetary Fund.
  4. Bichaka Fayissa & Christian Nsiah, 2010. "Can Remittances Spur Economic Growth and Development? Evidence from Latin American Countries (LACs)," Working Papers 201006, Middle Tennessee State University, Department of Economics and Finance.
  5. Yanikkaya, Halit, 2003. "Trade openness and economic growth: a cross-country empirical investigation," Journal of Development Economics, Elsevier, vol. 72(1), pages 57-89, October.
  6. Katsushi Imai & Raghav Gaiha & Abdilahi Ali & Nidhi Kaicker, 2013. "Remittances, Growth and Poverty: New Evidence from Asian Countries," Discussion Paper Series DP2013-18, Research Institute for Economics & Business Administration, Kobe University.
  7. Abu Siddique & E. A. Selvanathan & Saroja Selvanathan, 2011. "Remittances and Economic Growth: Empirical Evidence from Bangladesh, India and Sri Lanka," Journal of Development Studies, Taylor & Francis Journals, vol. 48(8), pages 1045-1062, October.
  8. Syed tehseen, jawaid & Abdul, waheed, 2011. "Effects of Terms of Trade and its Volatility on Economic Growth: A Cross Country Empirical Investigation," MPRA Paper 32694, University Library of Munich, Germany.
  9. Ahortor, Christian R.K. & Adenutsi, Deodat E., 2008. "The impact of remittances on economic growth in small-open developing economies," MPRA Paper 37109, University Library of Munich, Germany.
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