The author would like to thank Simon Feeny, Andrew Leigh, Ashton Da Silva, Tim Fry, Lisa Farrell, George Tawadros, Julia Farrell, and participants in the RMIT Economics seminar series for their valuable comments on earlier drafts. This paper also benefited from the useful comments of I-Ling Shen, Peter Petri, Peter Drysdale, Hugh Patrick, Nobuaki Yamashita, Shiro Armstrong, and other participants at the PAFTAD 33 Conference, Taipei, Taiwan October 5–8, 2009. The usual caveat applies.
REMITTANCES AND AGGREGATE LABOR SUPPLY: EVIDENCE FROM SIXTY-SIX DEVELOPING NATIONS
Article first published online: 23 FEB 2012
© 2012 The Author. The Developing Economies © 2012 Institute of Developing Economies
The Developing Economies
Volume 50, Issue 1, pages 25–39, March 2012
How to Cite
POSSO, A. (2012), REMITTANCES AND AGGREGATE LABOR SUPPLY: EVIDENCE FROM SIXTY-SIX DEVELOPING NATIONS. The Developing Economies, 50: 25–39. doi: 10.1111/j.1746-1049.2011.00153.x
- Issue published online: 23 FEB 2012
- Article first published online: 23 FEB 2012
- First version received November 2010; final version accepted September 2011
- Labor supply;
- Panel data;
- Developing countries
Do remittances reduce labor supply in recipient economies? This paper addresses this question with aggregate level data for a panel of sixty-six developing countries from the Middle East and Africa, Asia and the Pacific, and Latin America and the Caribbean over the period 1985 to 2005. The results exhibit a positive and significant relationship between remittances and aggregate labor supply. The effect is clearly driven by men in each of the three regions. Three potential explanations are put forward to explain these empirical findings: (1) non-migrating household members are likely to increase their labor supply in order to defray migration-related expenses; (2) neighboring households increase their labor supply to help family members migrate after they become more aware of the benefits of remittances; and (3) remittances overcome credit constraints, thus generating employment.