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Are there Significant Externality Effects of Remittances in Asian Economic Growth?

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Abstract

This paper estimates the externality effects of remittances for selected Asian countries. According to Romer (1986), externality generated by the education sector can raise nationwide productivity. Because a portion of remittances income is invested on education, remittances stock can also generate such externalities. Using a Romer-type production function and panel cointegration, we find that the externality effects of remittances are small but highly significant.

Suggested Citation

  • Gazi M. Hassan & Shamim Shakur, 2015. "Are there Significant Externality Effects of Remittances in Asian Economic Growth?," Working Papers in Economics 15/04, University of Waikato.
  • Handle: RePEc:wai:econwp:15/04
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    1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-1037, October.
    2. Lau, Sau-Him Paul & Sin, Chor-Yiu, 1997. "Observational equivalence and a stochastic cointegration test of the neoclassical and Romer's increasing returns models," Economic Modelling, Elsevier, vol. 14(1), pages 39-60, January.
    3. M. Hashem Pesaran, 2007. "A simple panel unit root test in the presence of cross-section dependence," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 22(2), pages 265-312.
    4. Pesaran, M. Hashem & Vanessa Smith, L. & Yamagata, Takashi, 2013. "Panel unit root tests in the presence of a multifactor error structure," Journal of Econometrics, Elsevier, vol. 175(2), pages 94-115.
    5. Pesaran, M.H., 2004. "‘General Diagnostic Tests for Cross Section Dependence in Panels’," Cambridge Working Papers in Economics 0435, Faculty of Economics, University of Cambridge.
    6. Rao, B. Bhaskara & Hassan, Gazi Mainul, 2011. "A panel data analysis of the growth effects of remittances," Economic Modelling, Elsevier, vol. 28(1-2), pages 701-709, January.
    7. Peter Pedroni, 2000. "Fully Modified OLS for Heterogeneous Cointegrated Panels," Department of Economics Working Papers 2000-03, Department of Economics, Williams College.
    8. Pedroni, Peter, 1999. " Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 61(0), pages 653-670, Special I.
    9. 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.
    10. Barry P. Bosworth & Susan M. Collins, 2003. "The Empirics of Growth: An Update," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 34(2), pages 113-206.
    11. Alejandra Cox Edwards & Manuelita Ureta, 2003. "International Migration, Remittances, and Schooling: Evidence from El Salvador," NBER Working Papers 9766, National Bureau of Economic Research, Inc.
    12. Edwards, Alejandra Cox & Ureta, Manuelita, 2003. "International migration, remittances, and schooling: evidence from El Salvador," Journal of Development Economics, Elsevier, vol. 72(2), pages 429-461, December.
    13. Peter Pedroni, 2001. "Purchasing Power Parity Tests In Cointegrated Panels," The Review of Economics and Statistics, MIT Press, vol. 83(4), pages 727-731, November.
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    More about this item

    Keywords

    remittances; externality effects; endogenous growth; panel cointegration; group-mean panel dynamic OLS;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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