Labour Market and Investment Effects of Remittances

Stephen Drinkwater, Paul Levine () and Emanuela Lotti ()

No 1906, School of Economics Discussion Papers from School of Economics, University of Surrey

Abstract: This paper examines the relationship between remittances from interna- tional migration and imperfections in labour and capital markets. We use a search-matching model of the labour market to show that remittances can have two opposing effects on the labour market of the source country. First, they raise the utility of the unemployed members back home and, if a worker's bargaining power is low, this causes the unemployment rate to rise. Second, remittances available for investment will relax credit constraints encountered by firms. If the `investment effect' outweighs the `search income' effect, then remittances will reduce the unemployment rate. Our empirical analysis sug- gests that remittances have a small negative effect on unemployment, but a positive and significant effect on investment.

Keywords: migration; remittances; capital constraints. (search for similar items in EconPapers)
JEL-codes: F22 F43 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2006-10
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://repec.som.surrey.ac.uk/2007/DP19-06.pdf (application/pdf)

Related works:
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:sur:surrec:1906

Access Statistics for this paper

More papers in School of Economics Discussion Papers from School of Economics, University of Surrey Contact information at EDIRC.
Bibliographic data for series maintained by Ioannis Lazopoulos ().