Remittances and the Dutch disease

Pablo Acosta, Emmanuel Lartey and Federico Mandelman

Journal of International Economics, 2009, vol. 79, issue 1, 102-116

Abstract: Using data for El Salvador and Bayesian techniques, we develop and estimate a two-sector dynamic stochastic general equilibrium model to analyze the effects of remittances on emerging market economies. We find that, whether altruistically motivated or otherwise, an increase in remittance flows leads to a decline in labor supply and an increase in consumption demand that is biased toward non-tradables. The higher non-tradable prices serve as incentive for an expansion of that sector, culminating in reallocation of labor away from the tradable sector -- a phenomenon known as the Dutch disease. Quantitative results also indicate that remittances improve the welfare of households because they smooth income flows and increase consumption and leisure levels. A BVAR analysis provides results that are consistent with the dynamics of the model.

Keywords: Dutch; disease; Real; exchange; rate; Remittances (search for similar items in EconPapers)
Date: 2009
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (289)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0022-1996(09)00088-9
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Remittances and the Dutch disease (2007)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:79:y:2009:i:1:p:102-116

Access Statistics for this article

Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and Rodríguez-Clare, Andrés

More articles in Journal of International Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu ().