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Worker remittances and government behaviour in the receiving countries

  • Ziesemer, Thomas

    ()

    (UNU-MERIT/MGSoG,and School of Business and Economics, Maastricht University)

We estimate the impact of worker remittances on savings, taxes, and public expenditures on education, all as a share of GDP, for about 30 years in two samples of countries with per capita income above and below $1200 using dynamic panel data methods. Remittances increase the savings ratio in both samples. Savings have an (inverted) u-shaped impact on the tax ratio in poor (rich) countries. Higher tax revenues lead to higher public expenditure on education in both samples. In the richer sample, governments raise less tax revenues but spend more on education in direct response to remittances. Governments of the poorer sample raise more tax revenues in response to remittances at low levels of remittances, but less at high levels of remittances. In simultaneous equation simulations of a permanent shock to remittances, the governments of richer countries reduce taxation and public expenditure on education as a share of GDP. This may slow down growth of human capital, one of the major growth factors. In poor countries they raise more tax revenues and spend more money on education, which is likely to support growth. Strong non-linearities, which differ by country group, make the effects of shocks dependent on the initial levels of the variables and the heterogeneity of the estimation results.

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File URL: http://www.merit.unu.edu/publications/wppdf/2012/wp2012-065.pdf
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Paper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 065.

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Date of creation: 2012
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Handle: RePEc:unm:unumer:2012065
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  1. Ziesemer, Thomas H.W., 2012. "Worker remittances, migration, accumulation and growth in poor developing countries: Survey and analysis of direct and indirect effects," Economic Modelling, Elsevier, vol. 29(2), pages 103-118.
  2. Thomas H.W. ZIESEMER, 2010. "Worker Remittances In Growth Regressions: The Problem Of Collinearity," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 10(2).
  3. R Blundell & Steven Bond, . "Initial conditions and moment restrictions in dynamic panel data model," Economics Papers W14&104., Economics Group, Nuffield College, University of Oxford.
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  6. Christian Hubert Ebeke, 2011. "Do Remittances Lead to a Public Moral Hazard in Developing Countries? An Empirical Investigation," Journal of Development Studies, Taylor & Francis Journals, vol. 48(8), pages 1009-1025, May.
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  9. Ziesemer, Thomas, 2012. "The impact of development aid on education and health: Survey and new evidence from dynamic models," MERIT Working Papers 057, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  10. Christian EBEKE, 2010. "Remittances, Value Added Tax and Tax Revenue in Developing Countries," Working Papers 201030, CERDI.
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  13. Desai, Mihir A. & Kapur, Devesh & McHale, John & Rogers, Keith, 2009. "The fiscal impact of high-skilled emigration: Flows of Indians to the U.S," Journal of Development Economics, Elsevier, vol. 88(1), pages 32-44, January.
  14. Ziesemer, Thomas H.W., 2010. "The impact of the credit crisis on poor developing countries: Growth, worker remittances, accumulation and migration," Economic Modelling, Elsevier, vol. 27(5), pages 1230-1245, September.
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  20. Osili, Una Okonkwo, 2007. "Remittances and savings from international migration: Theory and evidence using a matched sample," Journal of Development Economics, Elsevier, vol. 83(2), pages 446-465, July.
  21. Ziesemer, Thomas, 2011. "What Changes Gini Coefficients of Education? On the dynamic interaction between education, its distribution and growth," MERIT Working Papers 053, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  22. Roy Peter David Karpestam, 2012. "Dynamic multiplier effects of remittances in developing countries," Journal of Economic Studies, Emerald Group Publishing, vol. 39(5), pages 512-536, December.
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