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The Joint Effect of Emigration and Remittances on Economic Growth and Labor Force Participation in Latin America and the Caribbean
Author:
Alina Carare
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,
Alejandro Fiorito Baratas
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,
Jessie Kilembe
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,
Metodij Hadzi-Vaskov
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, and
Wenzhang Zhang
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Series:
IMF Working Papers
Volume/Issue:
Volume 2024: Issue 175
Language:
English
Publication Date:
09 Aug 2024
DOI:
https://doi.org/10.5089/9798400284410.001
ISBN:
9798400284410
ISSN:
1018-5941
Pages:
52
Keywords:
Emigration; Remittances; Labor Force Participation; Economic Growth; Latin America; emigration flow; emigration rate; remittances in Lac; estimates of emigration; remittances on the migrants' countries of origin; Migration; Income; Caribbean; Central America; South America
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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We provide a consistent empirical framework to estimate the net joint effect of emigration and remittances on the migrants’ countries of origin key economic variables (GDP growth and labor force participation), while addressing the endogeneity concerns using novel “shift-share” instrumental variables in the spirit of Anelli and others (2023). Understanding this joint impact is crucial for the Latin America and the Caribbean region that has seen a continuous growth in remittances over the past decades, due to steady emigration, and where remittances represent the largest capital inflows for many countries now. Focusing on the past two decades (1999-2019), this study finds that on average emigration has a negative and statistically significant impact on contemporaneous economic growth and change in labor force participation in the countries of origin across LAC, while remittances partially mitigate this adverse impact—especially on economic growth—resulting in a small negative net joint effect. There are significant differences across subregions for all estimates, with the largest negative effects observed in the Caribbean. In addition, the negative impact of emigration and remittances on the change in labor participation is small, but for the youngest cohort (15-24) is twice as large as for the overall labor force participation. The results are robust to various specifications, variables, and measurements of emigration and remittances.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund