Spillover effects of remittances on local public spending in developing economies

Rodríguez Raúl Alberto Ponce (), Rodríguez Benito Alán Ponce () and Guirado Juan Carlos Medina ()
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Rodríguez Raúl Alberto Ponce: Universidad Autónoma de Ciudad Juárez, Department of Social Science, Ciudad Juárez, Mexico
Rodríguez Benito Alán Ponce: Universidad Autónoma de Ciudad Juárez, Institute of Engineering and Technology, Ciudad Juárez, Mexico
Guirado Juan Carlos Medina: Universidad Autónoma de Ciudad Juárez, Department of Social Science, Ciudad Juárez, Mexico

Economics and Business Review, 2024, vol. 10, issue 4, 7-31

Abstract: We develop a political economy model to study spatial spillover effects of remittances on local public goods with inter-regional positive externalities. Our model postulates that spillovers of remittances are asymmetric with a complex pattern that depends on the degree of externalities of public spending, the inter-regional inequality of income, and whether local public goods are complementary or substitutes. We develop several tests to be verified empirically, for instance, our model states that if local public goods are substitutes and externalities are moderate, remittances received by households in one locality increase government spending in that locality but reduce spending in other districts. If externalities are significant, remittances affect local public spending in high-income localities but do not affect spending in low-income localities.

Keywords: remittances; local public goods; spillovers; inter-regional inequality; state and local government (search for similar items in EconPapers)
JEL-codes: D63 F24 H41 H7 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:vrs:ecobur:v:10:y:2024:i:4:p:7-31:n:1003

DOI: 10.18559/ebr.2024.4.1229

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