A Note on the Labor Market Effects of Remittances in Latin American and Caribbean Countries: Do Thresholds Exist?
Version of Record online: 13 FEB 2014
© 2014 Institute of Developing Economies
The Developing Economies
Volume 52, Issue 1, pages 52–67, March 2014
How to Cite
Jackman, M. (2014), A Note on the Labor Market Effects of Remittances in Latin American and Caribbean Countries: Do Thresholds Exist?. The Developing Economies, 52: 52–67. doi: 10.1111/deve.12034
- Issue online: 13 FEB 2014
- Version of Record online: 13 FEB 2014
- Manuscript Accepted: SEP 2013
- Manuscript Received: SEP 2012
- Panel threshold models;
- Latin America and the Caribbean;
The labor market effects of remittances have long been examined in the empirical literature. To date, the results have been mixed: some authors observe a negative association between remittances and unemployment while others report that remittances increase unemployment. This study empirically examines the impact of remittances on unemployment using macroeconomic data for a sample of 18 Latin American and Caribbean countries. Specifically, the study tests whether there is a nonlinear relationship between the variables. Results suggest that when the remittance-to-GDP ratio is low, remittances have a positive and significant impact on unemployment. However, as they increase, remittances are negatively associated with unemployment. This suggests the possibility that estimations based on the assumption of a linear relationship between remittances and labor may mask the true relationship between the variables.