Abstract
Much literature finds that migrants’ remittances have positive effects on the labor-outsourcing regions; however, it should be noted that the massive funds outflow from the labor host regions poses an impact on these regions as well. Moreover, the existing literature sheds little light on the theoretical study of remittances within one economy. This article theoretically analyzes the economic impact of migrants’ remittances on the labor host regions, the urban regions, and establishes a three-sector general equilibrium model to investigate the impacts of an increase in remittances on wage, employment and welfare level in the urban regions from the short- and long-term perspectives. We find that an increase in remittances will reduce the output of the informal sector and decrease urban residents’ welfare in the short term, while it will increase the output of the informal sector and augment urban residents’ welfare in the long term.
Similar content being viewed by others
Notes
Calculation by authors according to estimated data in Tumbe (2011).
References
Census of India (2001) Soft copy, India D-series, Migration Tables. Registrar General and Census Commissioner, India
Chaudhuri S (2007) Foreign capital, welfare and urban unemployment in the presence of agricultural dualism. Jpn World Econ 19:149–165
Djajic S (1986) International migration, remittances and welfare in a dependent economy. J Dev Econ 21(2):229–234
Djajic S (1998) Emigration and welfare in an economy with foreign capital. J Dev Econ 56:433–445
Gupta MR (1997) Informal sector and informal capital market in a small open less-developed economy. J Dev Econ 52:409–428
Hu F, Wang Q (2007) An analysis of determinants of remittances of China’s rural migrants—application of interval regression model. Stat Res 24(10):20–25 (in Chinese)
Kirwan F, Holden D (1986) Emigrants’ remittances, non-traded goods and economic welfare in the source country. J Econ Stud 13(2):52–58
Li XC, Qian XY (2011) Economic analysis on the urban–rural disparity in human capital in China. S Afr J Econ 79(2):146–160
Li XC, Zhou Y (2013) An economic analysis of remittance of unskilled migration on skilled–unskilled wage inequality in labor host region. Econ Model 33:428–432
Lundahl M (1985) International migration, remittances and real incomes: effects on the source country. Scand J Econ 87(4):647–657
Quibria MG (1997) International migration, remittances and income distribution in the source country: a synthesis. Bull Econ Res 49(1):29–46
Rivera-Batiz F (1986) International migration, remittances and economic welfare in the source country. J Econ Stud 13(3):3–19
Tumbe C (2011) Remittances in India: facts and issues. MPRA working paper series no. 331
Yabuuchi S, Beladi H (2001) Urban unemployment, informal sector and development policies. J Econ 74(3):301–314
Acknowledgments
We would like to thank the reviewer(s) for the suggestive comments on improving this paper. The present study is sponsored by the National Social Sciences Fund Project No.14JJD790016, for which the authors deeply appreciate. Any remaining errors are ours.