Why Don't Remittances Appear to Affect Growth?
Although measured remittances by migrant workers have soared in recent years, macroeconomic studies have difficulty detecting their effect on economic growth. This paper reviews existing explanations for this puzzle and proposes three new ones. Fir...
| Main Authors: | , |
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| Format: | Policy Research Working Paper |
| Language: | English en_US |
| Published: |
World Bank, Washington, DC
2014
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/2014/05/19457668/dont-remittances-appear-affect-growth http://hdl.handle.net/10986/18352 |
| Summary: | Although measured remittances by migrant
workers have soared in recent years, macroeconomic studies
have difficulty detecting their effect on economic growth.
This paper reviews existing explanations for this puzzle and
proposes three new ones. First, it offers evidence that a
large majority of the recent rise in measured remittances
may be illusory -- arising from changes in measurement, not
changes in real financial flows. Second, it shows that even
if these increases were correctly measured, cross-country
regressions would have too little power to detect their
effects on growth. Third, it points out that the greatest
driver of rising remittances is rising migration, which has
an opportunity cost to economic product at the origin. Net
of that cost, there is little reason to expect large growth
effects of remittances in the origin economy. Migration and
remittances clearly have first-order effects on poverty at
the origin, on the welfare of migrants and their families,
and on global gross domestic product; but detecting their
effects on growth of the origin economy is likely to remain elusive. |
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