Do Workers' Remittances Promote Economic Growth?

Michael T. Gapen, Adolfo Barajas, Ralph Chami (), Peter Montiel and Connel Fullenkamp

No 09/153, IMF Working Papers from International Monetary Fund

Abstract: 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.

Keywords: Capital accumulation; Capital flows; Developing countries; Economic growth; Foreign labor; Labor markets; Migration; Poverty reduction; Private capital flows; Transfers of foreigners income; Welfare; Workers remittances (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-fdg and nep-mig
Date: 2009-07-20
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