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Labour Market and Investment Effects of Remittances

Author

Listed:
  • Stephen Drinkwater

    (University of Surrey)

  • Paul Levine

    (University of Surrey)

  • Emanuela Lotti

    (University of Surrey)

Abstract

This paper examines the relationship between remittances from interna- tional migration and imperfections in labour and capital markets. We use a search-matching model of the labour market to show that remittances can have two opposing effects on the labour market of the source country. First, they raise the utility of the unemployed members back home and, if a worker's bargaining power is low, this causes the unemployment rate to rise. Second, remittances available for investment will relax credit constraints encountered by firms. If the `investment effect' outweighs the `search income' effect, then remittances will reduce the unemployment rate. Our empirical analysis sug- gests that remittances have a small negative effect on unemployment, but a positive and significant effect on investment.

Suggested Citation

  • Stephen Drinkwater & Paul Levine & Emanuela Lotti, 2006. "Labour Market and Investment Effects of Remittances," School of Economics Discussion Papers 1906, School of Economics, University of Surrey.
  • Handle: RePEc:sur:surrec:1906
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    File URL: https://repec.som.surrey.ac.uk/2007/DP19-06.pdf
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    References listed on IDEAS

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    Cited by:

    1. repec:hal:journl:halshs-00318870 is not listed on IDEAS
    2. Naiditch, Claire & Vranceanu, Radu, 2009. "Migrant wages, remittances and recipient labour supply in a moral hazard model," Economic Systems, Elsevier, vol. 33(1), pages 60-82, March.
    3. Safaa Tabit & Charaf-Eddine Moussir, 2017. "Impact Of Migrants' Remittances On Economic Growth: Case Of Morocco," Post-Print hal-01449502, HAL.
    4. Ivlevs, Artjoms, 2016. "Remittances and Informal Work," IZA Discussion Papers 10196, Institute for the Study of Labor (IZA).
    5. Paul Levine & Emanuela Lotti & Joseph Pearlman & Richard Pierse, 2010. "Growth And Welfare Effects Of World Migration," Scottish Journal of Political Economy, Scottish Economic Society, vol. 57(5), pages 615-643, November.
    6. Mahalia Jackman, 2014. "A Note on the Labor Market Effects of Remittances in Latin American and Caribbean Countries: Do Thresholds Exist?," The Developing Economies, Institute of Developing Economies, vol. 52(1), pages 52-67, March.

    More about this item

    Keywords

    migration; remittances; capital constraints.;

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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