Do Remittances Boost Economic Development? Evidence From Mexican States

Abstract

Remittances have been promoted as a development tool because they can raise incomes and reduce poverty rates in developing countries. Remittances may also promote development by providing funds that recipients can spend on education or health care or invest in entrepreneurial activities. From a macroeconomic perspective, remittances can boost aggregate demand and thereby GDP as well as spur economic growth. However, remittances may also have adverse macroeconomic impacts by increasing income inequality and reducing labor supply among recipients. We use state-level data from Mexico during 2003-2007 to examine the aggregate effect of remittances on employment, wages, unemployment rates, the wage distribution, and school enrollment rates. While employment, wages and school enrollment have risen over time in Mexican states, these trends are not accounted for by increasing remittances. However, two-stage least squares specifications among central Mexican states suggest that remittances shift the wage distribution to the right, reducing the fraction of workers earning the minimum wage or less.

Does migration raise agricultural investment? An empirical analysis for rural Mexico

“…This intuition is supported by a simple Durbin‐Wu‐Hausman Chi‐square test which rejects the exogeneity of our migration indictor in almost all regressions. For Mexico, various migration instruments have been used successfully, among them migration networks (Chiodi et al., ), historic state‐level migration rates (Taylor and Lopez‐Feldman, ; Woodruff and Zenteno, ), and migrant‐weighted economic conditions at the destination (Arslan and Taylor, ; Orrenius et al., ). We employ the number of years since the first migration occurred in each community.…”

Remittances and Financial Inclusion: Evidence from El Salvador

“…See data on the cost of sending remittances from the US to El Salvador from 2008 (the closest year to our sample period for which data is available) at http://remittanceprices.worldbank.org.12 We followMcKenzie and Rapoport (2007), who in their study of the impact of migration on income inequality in Mexico, use economic conditions in the US as one of their instruments for migration from Mexico. A similar approach is pursued byYang (2008), Amuedo-Dorantes and Pozo (2010) andOrrenius, Zavodny, Cañas, and Coronado (2010).13 The mentioned database is available at http://gis.ats.ucla.edu/naid/. The NAID gathered information on the main destinations in the US of Salvadoran migrants during the last five years.…”

Business Cycles and Remittances: Can the Beveridge-Nelson Decomposition Provide New Evidence?

“…In particular, their empirical results indicate that a 10 percent increase in per capita official international remittances will lead to a 3.5 percent decline in the share of people living in poverty. Orrenius et al [2009] study the impact of remittances on regional economic The altruism motive and the investment motive work against each other and perhaps can offset each other to some extent. The analysis I perform in this paper concentrates on the net effect between remittances and output in both home and host countries.…”