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Do Worker Remittances Reduce Output Volatility in Developing Countries?

Ralph Chami, Dalia Hakura and Peter Montiel

No 2010-01, Center for Development Economics from Department of Economics, Williams College

Abstract: Remittance inflows have increased considerably in recent years and are large relative to the size of many recipient economies. The theoretical and empirical effects of remittance inflows on output growth volatility are, however, ambiguous. On the one hand, remittances have been a remarkably stable source of income, relative to other private and public flows, and they seem to be compensatory in nature, rising when the home country’s economy suffers a downturn. On the other hand, the labor supply effects induced by altruistic remittances could cause the output effects associated with technology shocks to be magnified. This paper finds robust evidence for a sample of 70 remittance-recipient countries, including 16 advanced economies and 54 developing countries that remittances have a negative effect on output growth volatility, thereby supporting the notion that remittance flows are a stabilizing influence on output.

Keywords: Remittances; output volatility; developing countries (search for similar items in EconPapers)
JEL-codes: D02 D64 F02 F22 F24 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2010-10
New Economics Papers: this item is included in nep-dev, nep-lam and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: Do Worker Remittances Reduce Output Volatility in Developing Countries? (2012) Downloads
Working Paper: Do Worker Remittances Reduce Output Volatility in Developing Countries? (2010) Downloads
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