Spillover effects of remittances on local public spending in developing economies
DOI:
https://doi.org/10.18559/ebr.2024.4.1229Keywords:
local public goods, spillovers, state and local government, interregional inequality, remittancesAbstract
We develop a political economy model to study spatial spillover effects of remittances on local public goods with inter-regional positive externalities. Our theory shows that spillovers of remittances are asymmetric with a complex pattern that depends on the degree of externalities of public spending, the inter-regional inequality of income, and whether local public goods are complementary or substitutes. We develop several tests to be verified empirically, for instance our theory shows that if local public goods are substitutes and externalities are moderate, remittances received by households in one locality increase government spending in that locality but reduce spending in other districts. If externalities are significant, remittances affect local public spending in high-income localities but does not affect spending in low-income localities.
JEL Classification
Equity, Justice, Inequality, and Other Normative Criteria and Measurement (D63)
Remittances (F24)
Public Goods (H41)
State and Local Government • Intergovernmental Relations (H7)
Downloads
References
Abdih, Y., Chami, R., Dagher, J., & Montiel, P. (2012). Remittances and institutions: Are remittances a curse? World Development, 40(4), 657–666. https://doi.org/10.1016/j.worlddev.2011.09.014
View in Google Scholar
DOI: https://doi.org/10.1016/j.worlddev.2011.09.014
Adida, C. L., & Girod, D. M. (2011). Do migrants improve their hometowns? Remittances and access to public services in Mexico, 1995–2000. Comparative Political Studies, 44(1), 3–27. https://doi.org/10.1177/0010414010381073
View in Google Scholar
DOI: https://doi.org/10.1177/0010414010381073
Azizi, S. (2021). The impacts of workers’ remittances on poverty and inequality in developing countries. Empirical Economics, 60(2), 969–991. https://doi.org/10.1007/s00181-019-01764-8
View in Google Scholar
DOI: https://doi.org/10.1007/s00181-019-01764-8
Benhamou, Z. A., & Cassin, L. (2021). The impact of remittances on savings, capital and economic growth in small emerging countries. Economic Modelling, 94, 789– 803. https://doi.org/10.1016/j.econmod.2020.02.019
View in Google Scholar
DOI: https://doi.org/10.1016/j.econmod.2020.02.019
Easton, M. R., & Montinola, G. R. (2017). Remittances, regime type, and government spending priorities. Studies in Comparative International Development, 52, 349– 371. https://doi.org/10.1007/s12116-016-9233-7
View in Google Scholar
DOI: https://doi.org/10.1007/s12116-016-9233-7
Hankla, C. R., Martinez-Vazquez, J., & Rodríguez, R. A. (2019). Local accountability and national coordination in fiscal federalism: A fine balance. Edward Elgar Publishing.
View in Google Scholar
DOI: https://doi.org/10.4337/9781788972178
Johansson, O. (1997). Optimal Pigouvian taxes under altruism. Land Economics, 73(3), 297–308. https://doi.org/10.2307/3147169
View in Google Scholar
DOI: https://doi.org/10.2307/3147169
Kochi, I., & Ponce Rodríguez, R. A. (2010). Do remittances crowd out the government’s redistributive policy? Journal of Economic Development, 35(4), 45–72. https://doi.org/10.35866/caujed
View in Google Scholar
DOI: https://doi.org/10.35866/caujed.2010.35.4.003
Myers, G., (1990). Optimality, free mobility, and the regional authority in a federation. Journal of Public Economics, 43, 107–121.
View in Google Scholar
DOI: https://doi.org/10.1016/0047-2727(90)90053-K
Page, J., & Plaza, S. (2006). Migration remittances and development: A review of global evidence. Journal of African Economies, 15(2), 245–336.
View in Google Scholar
DOI: https://doi.org/10.1093/jae/ejl035
Ponce Rodríguez, R. A., & Ponce Rodríguez, B. A. (2022). Remittances and the size and composition of government spending. Revista de Economía y Finanzas Nueva Época, 18(4), 1–36. https://doi.org/10.21919/remef.v18i4.745
View in Google Scholar
DOI: https://doi.org/10.21919/remef.v18i4.745
Salas, V. B. (2014). International remittances and human capital formation. World Development, 59, 224–237. https://doi.org/10.1016/j.worlddev.2014.01.035
View in Google Scholar
DOI: https://doi.org/10.1016/j.worlddev.2014.01.035
Scotchmer, S. (2002). Local public goods and clubs. In: A. Auerbach, M. Feldstein (Eds.), Handbook of public economics (vol. 4, 1997–2042). Elsevier.
View in Google Scholar
DOI: https://doi.org/10.1016/S1573-4420(02)80008-8
Wellisch, D. (1994). Interregional spillovers in the presence of perfect and imperfect household mobility. Journal of Public Economics, 55(2), 167–184.
View in Google Scholar
DOI: https://doi.org/10.1016/0047-2727(94)90050-7
Wittman, D. A. (1983). Candidate motivation: A synthesis of alternative theories. The American Political Science Review, 77(1), 142–157. https://doi.org/10.2307/1956016
View in Google Scholar
DOI: https://doi.org/10.2307/1956016
World Bank Report. (2023). Remittances. World Bank Group. https://www.knomad.org/publication/migration-and-development-brief-39
View in Google Scholar
Downloads
Published
Issue
Section
License
Copyright (c) 2024 Raul Alberto Ponce Rodriguez, Benito Alan Ponce Rodriguez, Juan Carlos Medina Guirado
This work is licensed under a Creative Commons Attribution 4.0 International License.
