Remittance Flows and Economic Growth in Mexico: A Single Break Unit Root and Cointegration Analysis, 1970-2009

Miguel Ramirez

No 1106, Working Papers from Trinity College, Department of Economics

Abstract: This paper gives an overview of remittance flows to Mexico during the 1980-2009 period in absolute terms, relative to GDP, in comparison to FDI inflows, and in terms of their regional destination. Next, the paper reviews the growing literature that assesses the impact of remittances on investment spending and economic growth. Third, it develops a simple endogenous growth model that explicitly incorporates the potential impact of remittance flows on economic and labor productivity growth. Fourth it presents an empirical counterpart to the conceptual model and, using single-break unit root and cointegration analysis, proceeds to determine the impact of changes in these flows on economic growth and labor productivity growth over the 1970-2009 period. The error-correction model estimates suggest that remittance flows to Mexico, along with other relevant variables, have a positive and significant effect on both economic growth and labor productivity growth. The concluding section summarizes the major results and discusses potential avenues for future research on this important topic.

Keywords: Error-correction model; FDI inflows; Johansen Cointegration test; labor productivity growth; remittance flows; Theil inequality coefficient; Zivot-Andrews single-break unit root analysis (search for similar items in EconPapers)
JEL-codes: C22 F24 O15 O4 O54 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2011-07
New Economics Papers: this item is included in nep-fdg and nep-mig
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http://www3.trincoll.edu/repec/WorkingPapers2011/wp11-06.pdf First version, 2011 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:tri:wpaper:1106

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