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Remittances and Economic Growth in Mexico: An Empirical Study with Structural Breaks

Listed author(s):
  • Miguel Ramirez

    ()

    (Department of Economics, Trinity College)

This paper investigates remittance flows to Mexico during the 1980-2010 period in absolute terms, relative to GDP, in comparison to FDI inflows, and in terms of their regional destination. Next, the paper reviews the growing literature that assesses the impact of remittances on investment spending and economic growth. Third, it presents a simple endogenous growth model that explicitly incorporates the potential impact of remittance flows on economic and labor productivity growth. Fourth, it presents a modified empirical counterpart to the simple model that tests for both single- and two-break unit root tests, as well as performs cointegration tests with an endogenously determined level shift over the 1970-2010 period. The error-correction model estimates suggest that remittance flows to Mexico have a positive and significant effect, albeit small, on both economic growth and labor productivity growth. The concluding section summarizes the major results and discusses potential avenues for future research on this important topic.

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File URL: http://internet2.trincoll.edu/repec/WorkingPapers2013/WP13-06.pdf
File Function: First version, 2013
Download Restriction: no

Paper provided by Trinity College, Department of Economics in its series Working Papers with number 1306.

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Length: 37 pages
Date of creation: Mar 2013
Handle: RePEc:tri:wpaper:1306
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Web page: http://www.trincoll.edu/Academics/MajorsAndMinors/Economics/Pages/default.aspx

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