| By: |
Ziesemer, Thomas (University of Maastricht, Faculty of Economics) |
| Abstract: |
Remittances may have an impact on economic growth through channels to physical
and human capital. We estimate two variants of an open economy model of these
two channels consisting of seven equations using the general method of moments
with heteroscedasticity and autocorrelation correction (GMM-HAC) with pooled
data for four different samples of countries receiving remittances in 2003.
The countries with per capita income below $1200 benefit most from remittances
in the long run because they have the largest impact of remittances on
savings. Their remittances account for about 2% of the steady-state level of
GDP per capita when compared to the counterfactual of having no remittances.
Their ratio of the steady-state growth rates with and without remittances is
1.39. Transitional gains are higher than the steady-state gains only for the
human capital variables of this sample. As savings react much more strongly
than investment an important benefit of remittances is that less debt is
incurred and less debt service is paid than without remittances. The
elasticity of the GNI/GDP ratio with respect to the remittance/GDP ratio is
.002. All effects are much weaker for the richer countries. |
| Keywords: |
remittances, growth, simultaneous equation model |
| JEL: |
O15 J61 C33 |
| Date: |
2006 |
| URL: |
http://d.repec.org/n?u=RePEc:dgr:unumer:2006020&r=fdg |