Remittances, Institutions, and Economic Growth

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Remittances, Institutions and Economic GrowthNatalia Catrinescu Miguel Leon-Ledesma Matloob Piracha Bryce Quillin The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international research center and a place of communication between science, politics and business. IZA is an independent nonprofit company supported by Deutsche Post World Net. The center is associated with the University of Bonn and offers a stimulating research environment through its research networks, research support, and visitors and doctoral programs. IZA engages in (i) original and internationally competitive research in all fields of labor economics, (ii) development of policy concepts, and (iii) dissemination of research results and concepts to the interested public. D I S C U S S I O N P A P E R S E R I E SIZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author. There is considerable debate regarding the relative contribution of international migrants' remittances to sustainable economic development. While the rates and levels of officially recorded remittances to developing countries has increased enormously over the last decade, academic and policy-oriented research has not come to a consensus over whether remittances contribute to longer-term growth by building human and financial capital or degrade long-run growth by creating labor substitution and 'Dutch disease' effects. This paper suggests that contradictory findings have emerged when looking at the remittancesgrowth link because previous studies have not correctly controlled for endogeneity. Using Dynamic Data Panel estimates we find that remittances exert a weakly positive impact on long-term macroeconomic growth. The paper also considers the proposition that the longerterm developmental impact of remittances is increased in the presence of sound economic policies and institutions.JEL Classification: F22, O15, O47

Impact of FDI, ODA and Migrant Remittances on Economic Growth in Developing Countries: A Systems Approach

“…The underlying theory we use is motivated by a standard growth model where foreign direct investment (FDI), overseas development assistance (ODA), and migrant remittances are all introduced as components of investment (see Burnside and Dollar (2000), Catrinescu et al (2009)). Each financial flow finances the investment that determines economic growth.…”

“…Catrinescu et al (2009) seek to address this by using a dynamic panel GMM specification, employing data from the Inter Country Risk Guide (ICRG).…”

Remittances and their impact on Economic Growth

“…Indeed, the authors found significant negative interaction terms and interpreted these results as indicative of the credit constraint hypothesis; total remittances appeared to have positive effects on growth only in countries with small financial sectors where presumably credit constraints would be more pervasive. Another study, by Catrinescu and others [26], incorporated institutional variables into the analysis, which covered 114 countries during the 1991-2003 period. Catrinescu and colleagues conducted OLS cross-sectional and various static and dynamic panel regressions of per capita GDP growth on the (log of) total remittances-to-GDP, controlling for initial GDP per capita, ratios of gross capital formation and net private capital inflows to GDP, and such institutional variables as the United Nations Human Development Index, six governance indicators as in Kaufmann, Kraay, and Mastruzzi [62], and risk ratings from the International Country Risk Guide (ICRG).…”

Through Which Channels Can Remittances Spur Economic Growth in MENA Countries?

“…Remittances can also reduce labor market participation rates as receiving households opt to live of migrants' transfers rather than by working. Moreover, remittances' effect on growth and poverty might reduce the incentives for implementing sound macroeconomic policy or to institute necessary structural reforms (Catrinescu, Leon-Ledesma, Piracha and Quillin, 2009). These differences in results stem certainly from differences across countries regarding institutional aspects and various structural features, from different empirical frameworks and from various channels involved in such relationship.…”