Remittances and the Dutch disease (original) (raw)

The Macroeconomic Impact of Remittances: A sending country perspective

Using data for Germany, we analyze the impact of migration and remittances by developing an open-economy general equilibrium model with heterogeneous households. Within the model, the flows of remittances depend on the altruism of households. Households with higher altruism coefficient derive a higher utility from consumption of distant household members. Estimating the interrelation between household characteristic and remittances, we are able to derive altruism coefficients for different types of households. Applying the coefficients to our model, we show that remittances affect the macroeconomy primarily through the real exchange rate channel. Stronger remittances outflows depreciate the real exchange rate and give incentives to reallocate resources from the non-tradable towards tradable goods sectors. In the case of Germany, this translates into a converse dutch disease phenomenon.

Remittances Do Not Drain Host Countries’ Economies and Are Not Like Foreign Aid

Immigration Realities, 2024

In this chapter, we provide evidence to disprove the myth that remittances drain and burden host countries’ economies. We begin by outlining common arguments against remittances, particularly those in political speech, and subsequently contextualize important trends and demographic information regarding the characteristics of remitters, their reasons for remitting, and the share of wages they remit. We advance into a review of proposed remittance policies and taxes in the U.S. and present information that dispels beliefs about the effectiveness and ethics of imposing further taxation on remittances, referencing case studies and statistical evidence to support our assertions.

Beyond the Remittances-Driven Economy: Notes as if the Long Run Mattered

This paper discusses the causes and consequences of the current trend in which a principal driver of growth is inward remittances by workers deployed overseas. The main benefit of the phenomenon is an easing of the fiscal burden arising from the effectively large transfer from workers to the government. On the other hand, the “Dutch Disease” it causes takes a longterm toll on the tradables sector. The paper concludes that the fiscal payoffs from the phenomenon are best used by reinvesting these in the foundations of domestic competitiveness—particularly education and focused infrastructure—to offset the worst effects of the trend and prepare prudently for the time it ends or reverses.