Do Workers' Remittances Promote Economic Growth?

By Adolfo Barajas, R. Chami, C. Fullenkamp, Michael T. Gapen, Peter J. Montiel. Social Science Research Network, 2009

634 citations recorded by the source corpus.

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.

Subfields: Economics and Econometrics, Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/a2453c9c673688d1a49df0ce60b5b8eb23151da9

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Citations in the corpus

Impact of Migration on Economic and Social Development: A Review of Evidence and Emerging Issues (2011, neutral): “10 Empirical studies have found little evidence in support of a positive impact of remittances on economic growth (IMF 2005, World Bank 2006b; Spatafora 2005; Barajas et al. 2009; Singh et al. 2009).”
Impact of remittances on economic growth and poverty reduction amongst CIS countries (2019, methodology): “Similarly, Barajas et al. (2009), employing panel data for 115 developing countries, suggest as well that remittances have a negative effect on governance incentives.”
Remittances and Economic Growth: Larger Impacts in Smaller Countries? (2014, background): “Remittances can also reduce domestic macroeconomic volatility, thereby encouraging greater domestic investment (see Barajas et al., 2009).”
Remittances, growth and poverty: New evidence from Asian countries (2014, methodology): “The coefficient estimates indicate that the negative effects of volatility are little larger with FDI than 9 Our result is in sharp contrast to Barajas et al. (2009), which finds no relation between remittances and growth, or Chami et al. (2005) claiming that remittances negatively affect growth.”
Remittances flow and financial development in Bangladesh (2011, background): “…of the existing studies illustrate the positive, direct and indirect, growth effect of remittances especially for the developing countries employing cross country data (Barajas et al., 2009; Beck et al., 2004; Chami et al., 2003; Giuliano and Ruiz-Arranz, 2005; Rao and Hassan, 2010; Ratha, 2003).”
Why Don't Remittances Appear to Affect Growth? (2014, neutral): “3 There has been some debate over this definition with Barajas et al. (2009) just using workers’ remittances, and Guiliano and Ruiz-Arranz (2009) using the sum of all three components, but then making adjustments on a country-by-country basis.”
The impact of remittances on economic growth in Bangladesh, India, Pakistan and Sri Lanka (2020, background): “It is expected that remittance receipts have a negative effect on labor force participation addressing the moral hazard problem as the recipient families treat the inflows as non-labor income [9].”
Do remittances improve income inequality? An instrumental variable quantile analysis of the Kenyan case (2016, background): “With notable exceptions (Chami et al., 2005; Barajas et al., 2009; Rao and Hassan, 2011), the balance of the literature finds that remittances have had a positive impact on economic growth (Catrinescu et al., 2009; Ziesemer, 2012; Feeny et al., 2014particularly by stimulating financial development…”