Do Workers' Remittances Promote Economic Growth?

23 Pages Posted: 4 Aug 2009

See all articles by Adolfo Barajas

Adolfo Barajas

International Monetary Fund (IMF) - Western Hemisphere Department

Ralph Chami

International Monetary Fund (IMF)

Connel Fullenkamp

Duke University - Department of Economics

Michael Gapen

International Monetary Fund (IMF) - International Capital Markets Department

Peter J. Montiel

Williams College - Department of Economics

Date Written: July 2009

Abstract

Over the past decades, workers' remittances have grown to become one of the largest sources of financial flows to developing countries, often dwarfing other widely-studied sources such as private capital and official aid flows. While it is undeniable that remittances have poverty-alleviating and consumption-smoothing effects on recipient households, a key empirical question is whether they also serve to promote long-run economic growth. This study tackles this question and addresses the main shortcomings of previous empirical work, focusing on the appropriate measurement, and incorporating an instrument that is both correlated with remittances and would only be expected to affect growth through its effect on remittances. The results show that, at best, workers' remittances have no impact on economic growth.

Keywords: Capital accumulation, Capital flows, Developing countries, Economic growth, Foreign labor, Labor markets, Migration, Poverty reduction, Private capital flows, Transfers of foreigners income, Welfare, Workers remittances

Suggested Citation

Barajas, Adolfo and Chami, Ralph and Fullenkamp, Connel and Gapen, Michael and Montiel, Peter J., Do Workers' Remittances Promote Economic Growth? (July 2009). IMF Working Papers, Vol. , pp. 1-22, 2009. Available at SSRN: https://ssrn.com/abstract=1442255

Adolfo Barajas

International Monetary Fund (IMF) - Western Hemisphere Department ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-4152 (Phone)
202-623-6070 (Fax)

Ralph Chami

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6039 (Phone)
202-623-6068 (Fax)

Connel Fullenkamp

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
(919) 660-1800 (Phone)

Michael Gapen (Contact Author)

International Monetary Fund (IMF) - International Capital Markets Department ( email )

700 19th Street NW
Washington, DC 20431
United States

Peter J. Montiel

Williams College - Department of Economics ( email )

Fernald House
Office: Fernald 14
Williamstown, MA 01267
United States
413-597-2103 (Phone)
413-597-4045 (Fax)

HOME PAGE: http://www.williams.edu/Economics/faculty/montiel.htm

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