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Why don't remittances appear to affect growth ?

  • Clemens, Michael A.
  • McKenzie, David

Although measured remittances by migrant workers have soared in recent years, macroeconomic studies have difficulty detecting their effect on economic growth. This paper reviews existing explanations for this puzzle and proposes three new ones. First, it offers evidence that a large majority of the recent rise in measured remittances may be illusory -- arising from changes in measurement, not changes in real financial flows. Second, it shows that even if these increases were correctly measured, cross-country regressions would have too little power to detect their effects on growth. Third, it points out that the greatest driver of rising remittances is rising migration, which has an opportunity cost to economic product at the origin. Net of that cost, there is little reason to expect large growth effects of remittances in the origin economy. Migration and remittances clearly have first-order effects on poverty at the origin, on the welfare of migrants and their families, and on global gross domestic product; but detecting their effects on growth of the origin economy is likely to remain elusive.

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Paper provided by The World Bank in its series Policy Research Working Paper Series with number 6856.

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Date of creation: 01 May 2014
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Handle: RePEc:wbk:wbrwps:6856
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  1. Raju Jan Singh & Markus Haacker & Kyung-woo Lee & Maëlan Le Goff, 2011. "Determinants and Macroeconomic Impact of Remittances in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 20(2), pages 312-340, March.
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  12. McKenzie, David & Theoharides, Caroline & Yang, Dean, 2012. "Distortions in the International Migrant Labor Market: Evidence from Filipino Migration and Wage Responses to Destination Country Economic Shocks," IZA Discussion Papers 6498, Institute for the Study of Labor (IZA).
  13. Francisca M. Antman, 2013. "The impact of migration on family left behind," Chapters, in: International Handbook on the Economics of Migration, chapter 16, pages 293-308 Edward Elgar Publishing.
  14. Bollard, Albert & McKenzie, David & Morten, Melanie, 2010. "The remitting patterns of African migrants in the OECD," Policy Research Working Paper Series 5260, The World Bank.
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  16. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
  17. Jeffrey A. Frankel, 2009. "Are Bilateral Remittances Countercyclical?," NBER Working Papers 15419, National Bureau of Economic Research, Inc.
  18. Jadotte, Evans, 2009. "International Migration, Remittances and Labour Supply: The Case of the Republic of Haiti," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  19. Yan Sun & Udo Kock, 2011. "Remittances in Pakistan; Why have they gone up, and why Aren't they coming down?," IMF Working Papers 11/200, International Monetary Fund.
  20. John Gibson & David McKenzie & Steven Stillman, 2009. "The Impacts of International Migration on Remaining Household Members: Omnibus Results from a Migration Lottery Program," CReAM Discussion Paper Series 0920, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
  21. Giulia Bettin & Alberto Zazzaro, 2012. "Remittances And Financial Development: Substitutes Or Complements In Economic Growth?," Bulletin of Economic Research, Wiley Blackwell, vol. 64(4), pages 509-536, October.
  22. Catalina Amuedo-Dorantes & Cynthia Bansak & Susan Pozo, 2005. "On the remitting patterns of immigrants: evidence from Mexican survey data," Economic Review, Federal Reserve Bank of Atlanta, issue Q 1, pages 37-58.
  23. Alberto Posso, 2012. "Remittances And Aggregate Labor Supply: Evidence From Sixty‐Six Developing Nations," The Developing Economies, Institute of Developing Economies, vol. 50(1), pages 25-39, 03.
  24. Binzel, Christine & Assaad, Ragui, 2011. "Egyptian Men Working Abroad: Labor Supply Responses by the Women Left Behind," IZA Discussion Papers 5589, Institute for the Study of Labor (IZA).
  25. Acosta, Pablo A. & Lartey, Emmanuel K.K. & Mandelman, Federico S., 2009. "Remittances and the Dutch disease," Journal of International Economics, Elsevier, vol. 79(1), pages 102-116, September.
  26. Gibson, John & McKenzie, David, 2014. "Development through seasonal worker programs : the case of New Zealand's RSE program," Policy Research Working Paper Series 6762, The World Bank.
  27. Mohammad Irfan, 2011. "Remittances and Poverty Linkages in Pakistan: Evidence and Some Suggestions for Further Analysis," PIDE-Working Papers 2011:78, Pakistan Institute of Development Economics.
  28. Michael Lokshin & Elena Glinskaya, 2009. "The Effect of Male Migration on Employment Patterns of Women in Nepal," World Bank Economic Review, World Bank Group, vol. 23(3), pages 481-507, November.
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