Do Workers' Remittances Promote Economic Growth?

Abstract

This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. Over the past decades, workers' remittances have grown to become one of the largest sources of financial flows to developing countries, often dwarfing other widely-studied sources such as private capital and official aid flows. While it is undeniable that remittances have poverty-alleviating and consumption-smoothing effects on recipient households, a key empirical question is whether they also serve to promote long-run economic growth. This study tackles this question and addresses the main shortcomings of previous empirical work, focusing on the appropriate measurement, and incorporating an instrument that is both correlated with remittances and would only be expected to affect growth through its effect on remittances. The results show that, at best, workers' remittances have no impact on economic growth.

Migrant remittances and their impact on the economic development of the Baltic states

“…It can be shown that the impact of remittances on economic development was investigated in previous research using the category called "consumption". The direct and indirect effect of remittance on economic growth through consumption was argued by Barajas et al (2009), Giuliano and Ruiz-Arranz (2009), Ratha (2005), or Meyer and Shera (2017). For instance, Ratha (2005) points out the "consumption-smoothing" effect of remittance and considers them as a factor of sustainable economic growth.…”

The effect of worker remittances on economic growth: An ARDL approach

“…Rapoport (2002) stated that remittances are utilized as a source of finance for human and physical capital investment. Gapen et al, (2009) used ordinary least squares OLS and the fixed effect model; Catrinescu et al, (2008) used OLS; Cruz Zuniga (2011) used panel VAR; Ramirez (2013) applied FMOLS;and Hargreaves (1994) and Marwan et al, (2013) used the Johansen cointegration technique for checking the long-run effect of remittances on economic growth. One of the major problems with the Johansen cointegration technique is that it requires a large number of observations for analysis.…”

Análisis del impacto reciente de las remesas en el sector de la construcción en Colombia

“…Aunque el debate sobre el impacto de las remesas que una economía recibe a lo largo de un cierto periodo de tiempo, se ha centrado sobre si éstas pueden o no coadyuvar al crecimiento y desarrollo económico; bajo dicho contexto tanto Brown (2006) como Gapen, Barajas, Chami, Montiel, y Fullenkamp (2009), señalan que es indudable que las remesas constituyen un papel fundamental en los países en vías de desarrollo, puesto que una franja de su población percibe ingresos extraordinarios, los cuales pueden mejorar, aunque sea de forma marginal sus percepciones mensuales, que teóricamente significaría una mejora en la calidad de vida, sin embargo, dichos autores no comprueban empíricamente la relación del flujo de remesas con el crecimiento económico, por lo anterior, habrá que examinar el papel que juegan las remesas hacia el interior de la economía receptora, por ello es importante empezar con algunas definiciones de dichos ingresos.…”