Workers' Remittances and International Risk-Sharing

Metodij Hadzi-Vaskov

No 06-19, Working Papers from Utrecht School of Economics

Abstract: One of the most important potential benefits from the process of international financial integration is the opportunity it offers for diversification of macroeconomic risks internationally. In turn, the cross- border diversification of portfolio holdings is widely considered to be the major driving force behind this process. The present paper offers a complement to this literature. It identifies workers’ remittance flows to developing countries as an important channel through which the process of international risk-sharing might take place. Using a panel dataset that includes most developing countries during the period 1990-2000, this study demonstrates that countries which receive above-average levels of workers’ remittances achieve higher degrees of international risk-sharing in consumption. Moreover, this effect is not uniform across different groups of developing countries, being the strongest in transition economies.

Keywords: International Risk-Sharing; workers'remittances; consumption smoothing (search for similar items in EconPapers)
Date: 2006
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Citations: View citations in EconPapers (7)

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