Remittances, entrepreneurship, and employment dynamics over the business cycle

Federico Mandelman and Alan Finkelstein Shapiro

No 2014-19, FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta

Abstract: We incorporate remittances and microentrepreneurship (self-employment) into a small open-economy business cycle model with capital and labor market frictions. Countercyclical remittances moderate the decline of households' consumption during recessions. These remittances also are used to finance the start-up costs of microenterprises that bolster households' income during economic downturns. However, the positive income effect from countercyclical remittances also leads to a decrease in salaried labor supply, which generates offsetting upward pressure on wages during recessions and adversely affects the recovery of the salaried sector. Therefore, the behavior of remittances decisively affects labor force participation and the composition of employment between nonsalaried and salaried employment over the business cycle. The model delivers labor market and aggregate cyclical dynamics that are consistent with the Mexican data.

Keywords: business cycles; search and matching frictions; remittances (search for similar items in EconPapers)
JEL-codes: E24 E32 (search for similar items in EconPapers)
Pages: 35 pages
Date: 2014-11-01
New Economics Papers: this item is included in nep-ent and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Downloads: (external link)
https://frbatlanta.org/-/media/Documents/research/ ... 014/wp1419.pdf?la=en Full text (application/pdf)

Related works:
Journal Article: Remittances, entrepreneurship, and employment dynamics over the business cycle (2016)
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:fip:fedawp:2014-19

Ordering information: This working paper can be ordered from

Access Statistics for this paper

More papers in FRB Atlanta Working Paper from Federal Reserve Bank of Atlanta Contact information at EDIRC.
Bibliographic data for series maintained by Rob Sarwark ().