Do Remittances Promote Labor Productivity Growth in Mexico? An Empirical Analysis, 1970-2014

Miguel Ramirez

No 1702, Working Papers from Trinity College, Department of Economics

Abstract: This paper investigates remittance flows to Mexico during the 1980-2014 period in absolute terms, relative to GDP, in comparison to FDI inflows, and in terms of their regional destination. Next, the paper reviews the growing literature that assesses the impact of remittances on investment spending and economic growth. Third, it presents a simple endogenous growth model that explicitly incorporates the potential impact of remittance flows on economic and labor productivity growth. Fourth, it presents a modified empirical counterpart to the simple model that tests for both single- and two-break unit root tests, as well as performs cointegration tests with an endogenously determined level shift over the 1970-2014 period. The error-correction model estimates suggest that remittance flows to Mexico have a positive and significant effect, albeit small, on both economic growth and labor productivity growth. The concluding section summarizes the major results and discusses potential avenues for future research on this important topic

Keywords: Error-correction model; FDI inflows; Gregory-Hansen cointegration single-break test; Gross fixed capital formation; Johansen Cointegration test; KPSS no unit root test; Lee-Strazicich two-break unit root test; remittance flows; and Zivot-Andrews single-break unit root (search for similar items in EconPapers)
JEL-codes: C10 F01 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2017-06
New Economics Papers: this item is included in nep-eff, nep-gro, nep-his and nep-int
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http://www3.trincoll.edu/repec/WorkingPapers2017/WP17-02.pdf First version, 2017 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:tri:wpaper:1702

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