The Joint Effect of Emigration and Remittances on Economic Growth and Labor Force Participation in Latin America and the Caribbean

IMF Working Papers, August 9, 2024

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Canonical URL: The Joint Effect of Emigration and Remittances on Economic Growth and Labor Force Participation in Latin America and the Caribbean

Authors: Alina Carare, Alejandro Fiorito Baratas, Jessie Kilembe, Metodij Hadzi-Vaskov, Wenzhang Zhang
Published: August 9, 2024
Series: IMF Working Papers
DOI: https://doi.org/10.5089/9798400284410.001

Objective: Estimate the net joint effect of emigration and remittances on migrants’ countries of origin key economic variables: GDP growth and labor force participation.
Sample period: 1999-2019.
Identification strategy: Uses novel “shift-share” instrumental variables in the spirit of Anelli and others (2023) to address endogeneity concerns.
Outcome variables: Contemporaneous economic growth (GDP growth) and change in labor force participation, including cohort analysis for ages 15-24.

Average effects across LAC:
- Emigration has a negative and statistically significant impact on contemporaneous economic growth.
- Emigration has a negative and statistically significant impact on change in labor force participation.
- Remittances partially mitigate the adverse impact of emigration—especially on economic growth—resulting in a small negative net joint effect.
Subregional heterogeneity:
- Significant differences across subregions for all estimates.
- The largest negative effects are observed in the Caribbean.
Cohort effects:
- The negative impact of emigration and remittances on the change in labor participation is small for the overall labor force.
- For the youngest cohort (15-24), the negative impact is twice as large as for overall labor force participation.

Results are robust to:
- Various specifications.
- Alternative variables.
- Different measurements of emigration and remittances.