Labour market and Investment Effects of Remittances

The economic analysis of the effects of remittances has become an increasingly important issue in recent years because of the rapid growth of this form of financial flow. Official estimates put global remittances at around $80bn in 2002, but the total amount, which includes flows through unofficial channels, is thought to be far greater than this. Nevertheless, the official level of remittances greatly exceeds the amount received in overseas aid by developing and emerging economies. According to the World Bank (2006) WDI Database, it appears that for many emerging economies, remittances have been increasing rapidly since the early 1990s. They also appear to be far less volatile in comparison with other international capital flows and uncorrelated with them (Chami et al. 2008). Remittances are particularly important to some countries, with remittances in our sample of 19 lower and middle income countries equal to 3.8 percent of GDP.