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A Gravity Model of Workers’ Remittances

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  • Erik Lueth
  • Marta Ruiz-Arranz

Abstract

This paper creates the first dataset of bilateral remittance flows for a limited set of developing countries and estimates a gravity model for workers' remittances. We find that most of the variation in bilateral remittance flows can be explained by a few gravity variables. The evidence on the motives to remit is mixed, but altruism may be less of a factor than commonly believed. Most strikingly, remittances do not seem to increase in the wake of a natural disaster and appear aligned with the business cycle in the home country, suggesting that remittances may not play a major role in limiting vulnerability to shocks. To encourage remittances and maximize their economic impact, policies should be directed at reducing transaction costs, promoting financial sector development, and improving the business climate.

Suggested Citation

  • Erik Lueth & Marta Ruiz-Arranz, 2006. "A Gravity Model of Workers’ Remittances," IMF Working Papers 06/290, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:06/290
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    References listed on IDEAS

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    7. Rapoport, Hillel & Docquier, Frederic, 2006. "The Economics of Migrants' Remittances," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
    8. Aggarwal, Reena & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2006. "Do workers'remittances promote financial development ?," Policy Research Working Paper Series 3957, The World Bank.
    9. Jacques Bouhga-Hagbe, 2004. "A Theory of Workers' Remittances with An Application to Morocco," IMF Working Papers 04/194, International Monetary Fund.
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    12. Serdar Sayan, 2006. "Business Cycles and Workers' Remittances; How Do Migrant Workers Respond to Cyclical Movements of GDP At Home?," IMF Working Papers 06/52, International Monetary Fund.
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    Cited by:

    1. Alexander Culiuc, 2014. "Determinants of International Tourism," IMF Working Papers 14/82, International Monetary Fund.
    2. repec:taf:apeclt:v:23:y:2016:i:16:p:1177-1181 is not listed on IDEAS
    3. Ahmed, Junaid & Martinez-Zarzoso, Inmaculada, 2013. "Blessing or curse: The stabilizing role of remittances, foreign aid and FDI to Pakistan," Center for European, Governance and Economic Development Research Discussion Papers 153, University of Goettingen, Department of Economics.
    4. International Monetary Fund, 2014. "Former Yugoslav Republic of Macedonia; Selected Issues," IMF Staff Country Reports 14/232, International Monetary Fund.
    5. Bank for International Settlements, 2010. "Globalisation, labour markets and international adjustment - Essays in honour of Palle S Andersen," BIS Papers, Bank for International Settlements, number 50, November.
    6. Antje Hildebrandt & Isabella Moder, 2015. "Business cycle synchronization between the Western Balkans and the European Union," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 3, pages 8-25.
    7. Sandra Leitner & Bernhard Dachs & Robert Stehrer, 2012. "Determinants of R&D activities of multinational firms abroad," ERSA conference papers ersa12p196, European Regional Science Association.
    8. Eduardo Rodríguez-Montemayor & Pablo M. García, 2009. "A Primer of International Migration: The Latin American Experience," IDB Publications (Working Papers) 2544, Inter-American Development Bank.
    9. Wim Naudé & Henri Bezuidenhout, 2014. "Migrant Remittances Provide Resilience Against Disasters in Africa," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 42(1), pages 79-90, March.
    10. Izabela Sobiech, 2015. "Remittances, finance and growth: does financial development foster remittances and their impact on economic growth," FIW Working Paper series 158, FIW.
    11. David T Coe, 2010. "Globalisation and labour markets: implications of the emergence of China and India," BIS Papers chapters,in: Globalisation, labour markets and international adjustment - Essays in honour of Palle S Andersen, volume 50, pages 139-157 Bank for International Settlements.

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