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Foreign Transfers, Manufacturing Growth and the Dutch Disease Revisited

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  • Adwoa A. Nsor-Ambala
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    In a well-known study Rajan and Subramanian (2011) argue that aid causes a ‘Dutch Disease’ effect in aid-recipient countries. This study successfully replicates the first part of their findings and then uses a new, extended data set, different estimation methods, and another measure of aid to analyze the robustness of their results. In addition the study explores the effect of remittance flows on the relative growth of manufacturing sectors. In general, findings from the new, extended data set do not provide sufficient evidence to support the ‘Dutch Disease’ argument. In the case of international remittance flows, the findings indicate a positive remittance-manufacturing-growth relation, particularly in fixed effects models.

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    File URL: http://www.efm.bris.ac.uk/economics/working_papers/pdffiles/dp15663.pdf
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    Paper provided by Department of Economics, University of Bristol, UK in its series Bristol Economics Discussion Papers with number 15/663.

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    Length: 34 pages
    Date of creation: 19 Aug 2015
    Handle: RePEc:bri:uobdis:15/663
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    1. C-J. Dalgaard & H. Hansen, 2001. "On Aid, Growth and Good Policies," Journal of Development Studies, Taylor & Francis Journals, vol. 37(6), pages 17-41.
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    7. David Roodman, 2009. "How to do xtabond2: An introduction to difference and system GMM in Stata," Stata Journal, StataCorp LP, vol. 9(1), pages 86-136, March.
    8. Rajan, Raghuram G. & Subramanian, Arvind, 2011. "Aid, Dutch disease, and manufacturing growth," Journal of Development Economics, Elsevier, vol. 94(1), pages 106-118, January.
    9. Holtz-Eakin, Douglas & Newey, Whitney & Rosen, Harvey S, 1989. "The Revenues-Expenditures Nexus: Evidence from Local Government Data," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 30(2), pages 415-429, May.
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    17. Stark, Oded & Taylor, J Edward & Yitzhaki, Shlomo, 1986. "Remittances and Inequality," Economic Journal, Royal Economic Society, vol. 96(383), pages 722-740, September.
    18. Combes, Jean-Louis & Ebeke, Christian, 2011. "Remittances and Household Consumption Instability in Developing Countries," World Development, Elsevier, vol. 39(7), pages 1076-1089, July.
    19. Manuel Arellano & Stephen Bond, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Oxford University Press, vol. 58(2), pages 277-297.
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    21. Gabriel Gonzalez-Konig & Quentin Wodon, 2005. "Remittances and Inequality," Department of Economics and Finance Working Papers EC200506, Universidad de Guanajuato, Department of Economics and Finance.
    22. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, vol. 49(6), pages 1417-1426, November.
    23. William Easterly, 2007. "Was Development Assistance a Mistake?," American Economic Review, American Economic Association, vol. 97(2), pages 328-332, May.
    24. Connel Fullenkamp & Thomas F. Cosimano & Michael T. Gapen & Ralph Chami & Peter J Montiel & Adolfo Barajas, 2008. "Macroeconomic Consequences of Remittances," IMF Occasional Papers 259, International Monetary Fund.
    25. James Dzansi, 2013. "Do remittance inflows promote manufacturing growth?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 51(1), pages 89-111, August.
    26. Michael T. Gapen & Ralph Chami & Peter J Montiel & Adolfo Barajas & Connel Fullenkamp, 2009. "Do Workers’ Remittances Promote Economic Growth?," IMF Working Papers 09/153, International Monetary Fund.
    27. Ibrahim Sirkeci & Jeffrey H. Cohen & Dilip Ratha, 2012. "Migration and Remittances during the Global Financial Crisis and Beyond," World Bank Publications, The World Bank, number 13092, April.
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