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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 & Kyung-woo Lee & Markus Haacker, 2009. "Determinants and Macroeconomic Impact of Remittances in Sub-Saharan Africa," IMF Working Papers 09/216, International Monetary Fund.
  2. Gibson, John & McKenzie, David & Stillman, Steven, 2009. "The Impacts of International Migration on Remaining Household Members: Omnibus Results from a Migration Lottery Program," IZA Discussion Papers 4375, Institute for the Study of Labor (IZA).
  3. 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).
  4. Rao, B.Bhaskara & Hassan, Gazi, 2009. "A panel data analysis of the growth effects of remittances," MPRA Paper 18021, University Library of Munich, Germany.
  5. Jonathan Temple, 1999. "The New Growth Evidence," Journal of Economic Literature, American Economic Association, vol. 37(1), pages 112-156, March.
  6. Giulia Bettin & Andrea Filippo Presbitero & Nikola Spatafora, 2014. "Remittances and vulnerability in developing countries," Mo.Fi.R. Working Papers 93, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  7. Rapoport, Hillel & Docquier, Frederic, 2006. "The Economics of Migrants' Remittances," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
  8. Giuliano, Paola & Ruiz-Arranz, Marta, 2006. "Remittances, Financial Development, and Growth," IZA Discussion Papers 2160, Institute for the Study of Labor (IZA).
  9. Antman, Francisca M., 2012. "The Impact of Migration on Family Left Behind," IZA Discussion Papers 6374, Institute for the Study of Labor (IZA).
  10. 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.
  11. 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.
  12. Giulia Bettin & Alberto Zazzaro, 2009. "Remittances and Financial Development:;Substitutes or Complements in Economic Growth?," Mo.Fi.R. Working Papers 28, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  13. Frankel, Jeffrey A., 2010. "Are Bilateral Remittances Countercyclical?," Scholarly Articles 4450131, Harvard Kennedy School of Government.
  14. Pablo A. Acosta & Emmanuel K.K. Lartey & Federico S. Mandelman, 2007. "Remittances and the Dutch disease," Working Paper 2007-08, Federal Reserve Bank of Atlanta.
  15. Catrinescu, Natalia & Leon-Ledesma, Miguel & Piracha, Matloob & Quillin, Bryce, 2006. "Remittances, Institutions and Economic Growth," IZA Discussion Papers 2139, Institute for the Study of Labor (IZA).
  16. Isabel Ruiz & Elias Shukralla & Carlos Vargas-Silva, 2009. "Remittances, Institutions and Growth: A Semiparametric Study," International Economic Journal, Taylor & Francis Journals, vol. 23(1), pages 111-119.
  17. Catalina Amuedo-Dorantes & Cynthis 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.
  18. Binzel, Christine & Assaad, Ragui, 2011. "Egyptian men working abroad: Labour supply responses by the women left behind," Labour Economics, Elsevier, vol. 18(S1), pages S98-S114.
  19. 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.
  20. Simone Bertoli & Francesca Marchetta, 2014. "Migration, Remittances and Poverty in Ecuador," Journal of Development Studies, Taylor & Francis Journals, vol. 50(8), pages 1067-1089, August.
  21. Freund, Caroline & Spatafora, Nikola, 2008. "Remittances, transaction costs, and informality," Journal of Development Economics, Elsevier, vol. 86(2), pages 356-366, June.
  22. Samuel Bazzi & Michael A. Clemens, 2013. "Blunt Instruments: Avoiding Common Pitfalls in Identifying the Causes of Economic Growth," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(2), pages 152-86, April.
  23. Albert Bollard & David McKenzie & Melanie Morten, 2009. "The Remitting Patterns of African Migrants in the OECD," CReAM Discussion Paper Series 0921, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
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