Do Remittances Promote Labor Productivity in Mexico? A DOLS and FMOLS Analysis, 1970-2017 (original) (raw)

Remittances and Economic Growth in Mexico: An Empirical Study with Structural Breaks, 1970-2010

Business and Economic Research, 2014

This paper investigates remittance flows to Mexico during the 1980-2010 period in absolute terms, relative to GDP, in comparison to FDI inflows, and in terms of their regional destination. Next, the paper reviews the growing literature that assesses the impact of remittances on investment spending and economic growth. Third, it presents a simple endogenous growth model that explicitly incorporates the potential impact of remittance flows on economic and labor productivity growth. Fourth, it presents a modified empirical counterpart to the simple model that tests for both single-and two-break unit root tests, as well as performs cointegration tests with an endogenously determined level shift over the 1970-2010 period. The error-correction model estimates suggest that remittance flows to Mexico have a positive and significant effect, albeit small, on both economic growth and labor productivity growth. The concluding section summarizes the major results and discusses potential avenues for future research on this important topic.

Remittances and development in Mexico. A critical overview from the macro-economics perspective

This job presents statistical information with the intention of documenting a critical vision on the remittances issues. It is analyzed from a macro-economical dimension the role and meaning of the remittances in the recent economical growth and development in Mexico, particularly in the relation to the remittances’ volume and economical behavior, in relation to other basic macro-economical variables. The hypothesis are confirmed, that in macro-economical terms, the remittances fundamentally constitute a familiar transference funds which have a scarce or null impact on the growth capability and economical development; besides, in Mexico the remittances have not followed a linear and growing tendency. So in moments of stability and economical growth, remittances have been relatively stable, whereas they are significantly increased in the economical crisis periods.

The contribution of remittances to growth A dynamic approach and empirical analysis

Purpose -The aim of this paper is to investigate the impact of exogenous shocks of remittances on consumption, investment, imports and output in five Mediterranean countries. Design/methodology/approach -This paper builds a Keynesian type econometric model with a dynamic perspective and a sound theoretical basis. The model is used for estimating short and long-run multipliers of remittances, through which the impact of remittances on growth and other key macroeconomic variables is estimated. Findings -The analysis reveals a uniform country performance of instability and uncertainty, with great temporal and inter-country fluctuations of remittance effects. The findings point to different inter-country priorities of remittance spending and to an asymmetric impact of remittance changes, in the sense that the good done to growth by rising remittances is not as great as the harm done by falling remittances.

Remittances and Economic Growth: Analysis of the Direct and Indirect Effects

2017

As remittances inflows have increased steadily in the recent years, researchers and policy makers have analyzed more and more the impact those flows have on economic development. However, the literature has not reached a consensus on whether remittances where beneficial or not for economic growth. This paper investigates the direct and indirect effects of remittances on economic growth using a dataset of 129 countries between 1980 and 2014. The potential stabilizing role of remittances on output volatility will be analyzed as well. I extended the Augmented Solow Model developed by Mankiw, Romer and Weil (1992) with remittances to highlight two main growth channels: human and physical capital accumulation. Results showed that remittances had a direct positive impact on economic growth which was enhanced where physical and human capital accumulation levels were low. Furthermore, remittances are not used as a way to smooth consumption. Results therefore show that households use remitta...

Remittances and their impact on Economic Growth

Periodica Polytechnica Social and Management Sciences, 2013

In the worldwide economy, remittances represent one of the major international flows of financial resources. Worker remittances constitute an increasingly important mechanism for the transfer of resources from developed to developing countries, and remittances are the second-largest source, behind foreign direct investment, of external funding for developing countries. Sometimes the flows of remittances can exceed the flows of foreign direct investment (FDI). Yet, literature on worker remittances has so far focused mainly on the impact of remittances on income distribution within countries, on the determinants of remittances at a micro-level, or on the effects of emigration and remittances for specific countries or regions. This paper tries to study the impact of remittances on various macroeconomic and developmental aspects for the economy. This study aims to observe the impact of remittances on economic growth, using a panel data set of 21 developing countries, during the period 1992-2012. These countries have experienced a major increase in remittance inflows, and at this time accounts for the bulk of total remittance receipts, compared with other regions. The paper is then to review the theoretical as well empirical literature devoted to remittances, in order; first, to select the arguments that can be applied to the countries and second, to identify empirically if there are significant relationships between remittances and GDP per capita in these countries.

Does Workers' Remittances Affect Growth: Evidence from Seven MENA Labor Exporting Countries

International Research Journal of Finance and Economics, 2010

This paper presents an empirical examination of effects of workers' remittance on economic growth in a sample of 7 remittance-receiving MENA countries. In order to empirically analyze the impact of remittances we estimate growth equations using a set of 7 MENA labor exporting countries during the period 1975-2006. A standard growth models are estimated using both fixed-effects and random effects models. The empirical results show the support of the fixed-effects method as the random effects model is rejected in statistical tests. The results show the support for the view that remittances have a positive impact on growth both directly and indirectly through their interactions with financial and institutional channels.

Can Remittances Spur Economic Growth and Development? Evidence from Latin American Countries (LACs)

For the last five decades, there have been heated debates on the sources of economic growth in developing economies. The perceived factors of economic growth have ranged from surplus labor to investment in human and physical capital, transfer of technological change, overseas development assistance, flow of private capital, increasing returns from investment in new ideas and research and development. The impacts of the above listed traditional sources of economic growth have been well documented in literature. Researchers have also considered the importance of institutional factors such as the role of political freedom, political instability, voice and accountability on economic growth and development. Despite the increased size of remittances in the total international capital flows, however, the relationship between remittances and economic growth has not been adequately studied. This study explores the aggregate impact of remittances on the economic growth of 18 Latin American Co...

The Importance of Macroeconomic Conditions on Remittances: the Case of Mexico

In this document we evaluate how macroeconomic conditions influence the amount of remittances sent to Mexico from the United States. Specifically, we perform cointegration tests to determine the existence and magnitude of common trends between remittances and variables believed to influence their dynamics; including employment in the states of Arizona, California, Illinois and Texas, the real exchange rate, credit granted to the private sector and inflation in Mexico. In addition, common cycle tests are performed to identify common transitory movements among said variables. Our findings indicate that employment in the US, and credit and inflation in Mexico, affect significantly the amount of remittances sent in the long-run. In addition, the real exchange rate and remittances are found to be positively related in the long-run but negatively associated in the short-run. That is, a devaluation of the Mexican currency decreases the flows of remittances transitorily, but it increases them in longer horizons.

Are remittances a stabilizing factor in the Mexican economy

This paper evaluates whether remittances can function as a countercyclical mechanism for a recessive phase of the business cycle in Mexico. Remittances have resulted from the intense migration of Mexican workers to the USA during the nineties. The flow of remittances in Mexico had an explosive growth until the year 2006; since 2007, a drastic drop in this growth is observed, and in 2008 it became negative. A panel data model was established using information of the GDP and remittances at the state level for the period 2005-2008. This methodology considers the regional effects of remittances on the economic growth of the Mexican economy. The econometric results of the analysis indicated that remittances have a positive coefficient with respect to the position of the business cycle in Mexico. Additionally, the findings weaken the positions of those that consider the strategy of promoting remittances for use as a tool for macroeconomic stabilization of the business cycle. n Resumen: El trabajo evalúa el papel de las remesas como un mecanismo contracíclico para la fase recesiva del ciclo económico en México. Los flujos de remesas derivan de la intensa migración de trabajadores mexicanos hacia los EUA durante la década de los noventa. El flujo de remesas creció explosivamente hasta el 2006, cayendo en el 2007 y convirtiéndose en negativo en 2008. En el artículo se establece un modelo econométrico de panel utilizando el PIB y a las remesas al nivel estatal para el periodo 2005-2008. Los resultados econométricos muestran un coeficiente positivo para las remesas con relación al comportamiento del componente cíclico del PIB en México. Dichos resultados debilitan loa planteamientos respecto a la consideración de los ingresos por remesas como un instrumento de estabilización macroeconómico en la fase recesiva del ciclo económico. n