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Remittances, Countercyclicality, Openness and Government Size

Published online by Cambridge University Press:  09 January 2015

Christian Hubert Ebeke
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Summary

This paper investigates whether remittance inflows reduce the elasticity of government size with respect to trade openness. Put differently, the paper tests the hypothesis that there is a partial substitution between public insurance through government spending and a private insurance through remittances in more open countries. The insurance role of remittances is evaluated by computing annual panel data coefficients of remittance cyclically with respect to the real GDP cycle. It appears that remittances have become more countercyclical during the end 1990s. Moreover, the trade openness, natural disasters, inflation and the shallowness nature of the financial system are among the main determinants of the countercyclicality of remittance inflows. From a simple theoretical model close to Rodrik (1998) and on the basis of econometric estimations using a large sample of developing countries (66), it appears that the positive impact of trade openness on government spending decreases with the level of remittances received. Moreover, it is when remittances are effectively countercyclical that the mechanism described here works.

Cet article examine l'impact des transferts des migrants sur les dépenses publiques dans les économies du monde en développement. Nous testons l'argument selon lequel, il s'opère une substitution partielle entre l'assurance publique et l'assurance privée qu'offrent les transferts des migrants dans les pays ouverts sur l'extérieur. La capacité des transferts des migrants à effectivement jouer ce rôle d'assurance contre les chocs, est évaluée en construisant des mesures de cyclicité des transferts des migrants vis-à-vis du PIB réel qui ont l'avantage de pouvoir varier par pays et par année et qui sont robustes à l'endogeneité potentielle du taux du PIB réel. Il apparaît que la contracycli-cité des transferts des migrants concerne à peu près la moitié des pays de l'échantillon et qu'elle s'est renforcée depuis la fin des années 1990. Par ailleurs, nos estimations économétriques montrent que l'ouverture commerciale, l'occurrence de catastrophes naturelles, le niveau d'inflation et les faibles niveaux de développement économique et financier sont des déterminants significatifs de la contracyclicité des transferts de migrants. Ensuite, sur la base d'un modèle théorique simple inspiré de Rodrik (1998) et d'estimations économétriques à partir d'un échantillon de 67 pays en développement, nous montrons d'une part que l'ouverture commerciale exerce bien une pression à la hausse des dépenses publiques et d'autre part, cet impact décroît avec le niveau de transferts des migrants reçus. Il apparaît en outre que c'est véritablement lorsque les transferts des migrants sont contracycliques qu'ils conduisent à une baisse de la consommation publique.

Keywords

Remittancescountercyclicalityopennessgovernment consumptionF24 E62 012Transferts des migrantsouvertureconsommation publiquecyclicitéF24E62012
Type
Research Article
Information
Recherches Économiques de Louvain/ Louvain Economic Review , Volume 77 , Issue 4 , December 2011 , pp. 89 - 114
Copyright
Copyright © Université catholique de Louvain, Institut de recherches économiques et sociales 2011 

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Footnotes

*

International Monetary Fund, 700 19th Street, N.W., Washington DC 20431, USA, and Centre d'Études et de Recherches sur le Développement International (Cerdi), France. E-mail: Cebeke@imf.org. I would like to thank Prof. Jean-Louis Combes, the Editor of Louvain Economic Review and two anonymous referees for their insightful comments and suggestions. The views expressed in this paper are those of the author and should not be attributed to the institutions with which he is affiliated

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