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GTAP Resource #2348

"Do Remittances Have a Flip Side? A General Equilibrium Analysis of Remittances, Labor Supply Responses and Policy Options for Jamaica"
by Bussolo, Maurizio and Denis Medvedev

Econometric analysis has established a negative relationship between labor supply and remittances in Jamaica. We incorporate this ex-post evidence in a general equilibrium model to investigate economy-wide effects of increased remittance inflows. In this model, remittances reduce labor force participation by increasing the reservation wages of recipients. This exacerbates the real exchange rate appreciation, hurting Jamaica’s export base and small manufacturing import-competing sector. Within the narrow margins of maneuver of a highly indebted government, we show that a revenue-neutral policy response of a simultaneous reduction in payroll taxes and increase in sales taxes can effectively counteract these potentially negative effects of remittances.

Resource Details (Export Citation) GTAP Keywords
Category: 2007 Conference Paper
Status: Published
By/In: Presented at the 10th Annual Conference on Global Economic Analysis, Purdue University, USA; World Bank Policy Research Working Paper 4143; Journal of Economic Integration Vol. 23. No. 3
Date: 2007
Created: Medvedev, D. (4/13/2007)
Updated: Batta, G. (4/16/2007)
Visits: 3,351
- Domestic policy analysis
- Labor market issues
- Caribbean

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