Macroeconomic Role of Remittances

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School of Business | Bachelor's thesis
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Date

2025

Department

Taloustieteen laitos

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Mcode

Degree programme

Bachelor’s programme in Economics

Language

en

Pages

26

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Abstract

This thesis examines in a form of a literature review the impact of remittances on the economy of the recipient countries. First I describe models which explain how the allocation of remittances can have two opposite effects, either contractionary or expansionary. I then further examine existing empirical studies conducted on the impact of remittances on labor force participation, but also on poverty elevation and inequality, and discuss why mainly the contractionary effect is observed in real life. At the end I discuss implications for policymakers which arise from the described findings. This thesis examines in a form of a literature review the impact of remittances on the economy of the recipient countries. First I describe models which explain how the allocation of remittances can have two opposite effects, either contractionary or expansionary. I then further examine existing empirical studies conducted on the impact of remittances on labor force participation, but also on poverty elevation and inequality, and discuss why mainly the contractionary effect is observed in real life. At the end I discuss implications for policymakers which arise from the described findings.

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Thesis advisor

Domnisoru, Ciprian

Keywords

remittances, labor market, emigration, poverty, inequality, income

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https://urn.fi/URN:NBN:fi:aalto-202505254031

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[kand] Kauppakorkeakoulu / BIZ