The impact of the credit crisis on poor developing countries: Growth, worker remittances, accumulation and migration

Abstract

Abstract. The credit crisis of OECD countries has a negative impact on the growth of the world economy according to a simple error correction model. This causes negative growth effects in poor developing countries. The reduced growth has a direct or indirect impact on the convergence issue, aid, remittances, labour force growth, investment and savings, net foreign debt, migration, tax revenues, public expenditure on education and literacy. We estimate dynamic equations of all these variables using dynamic panel data methods for a panel of countries with per capita income below $1200 (2000). The estimated equations are then integrated to a dynamic system of fourteen equations for fourteen variables that allows for highly non-linear baseline simulations for these open economies. Then we analyze the effects of shocks as predicted by the international organizations for the OECD and world growth for 2008 and 2009. Whereas growth rates return to the baseline scenario very quickly, the GDP per capita returns to its baseline level in OECD countries and the world economy after some years but in poor developing countries it remains below the baseline scenario for more than 200 years. This long run blow to convergence leads to more remittances and emigration, a lower labour force growth, higher shares of GDP for saving, tax revenues, public expenditure on education and investment, and higher literacy. However, all these stabilizing forces through remittances and emigration cannot compensate the losses in levels of growth. Short and medium run effects are driven by a return to baseline for OECD and world GDP growth rates by the end of 2010, but for levels only 10 to 30 years later. Therefore we first get 15 to 20 years of fewer remittances, tax revenues, savings, public expenditure on education, literacy, and investment, more emigration and lower labour force growth.

The Relationship between Economic Growth and Remittances In The Presence of Cross-Sectional Dependence

“…Another finding of the same study suggests that international migration and remittances may be endogenous to poverty meaning variations in poverty cause changes in both the share of migrants going to work abroad and in the level of remittances sent home. Remittances have positive effect not only on level and growth rates of GDP per capita but also on the rates of savings and public expenditure (Ziesemer, 2010). Ahmed and Walmsley (2009) show that remittances increase net welfare in India.…”

The Effects of Remittances on Economic Growth in West Africa

“…Pradhan et al (2008) confirmed the positive growth effect of remittance in a panel of 39 developing countries. Remittances have a positive influence on the rates of savings and public expenditure, not only on level and growth rates of GDP per capita (Ziesemer, 2010). Majumder and Donghui (2016) have examined the impact of remittances, trade and money supply on the economic growth of Bangladesh, by employing the Bounds testing approach.…”

Kinetics of jobs in multi-link cities with migration-driven aggregation process

“…With the development of knowledge in network (Ke et al, 2006a(Ke et al, , 2006b, we are capable of connecting aggregation process with social sciences (Bellaiche, 2010;Gonzalez-Avella et al, 2011). One important and popular application of aggregation process in social science is population dynamics (Brito and Dilao, 2010;Eckstein et al, 2011;Feng et al, 2010;Gupta and Dutta, 2011;Konan, 2011;Wang et al, 2007;Ziesemer, 2010). Population dynamics involves issues like population migration (Brito and Dilao, 2010;Feng et al, 2010;Konan, 2011), population growth (Wang et al, 2007) and job mobility (Eckstein et al, 2011;Gupta and Dutta, 2011;Ziesemer, 2010).…”

“…One important and popular application of aggregation process in social science is population dynamics (Brito and Dilao, 2010;Eckstein et al, 2011;Feng et al, 2010;Gupta and Dutta, 2011;Konan, 2011;Wang et al, 2007;Ziesemer, 2010). Population dynamics involves issues like population migration (Brito and Dilao, 2010;Feng et al, 2010;Konan, 2011), population growth (Wang et al, 2007) and job mobility (Eckstein et al, 2011;Gupta and Dutta, 2011;Ziesemer, 2010). Much research has contributed to social networks (Bramoulle and Saint-Paul, 2010) where scholars have tried different models to mimic some parts of real life interaction of people.…”