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The effects of migration and remittances on development and capital in Caribbean Small Island Developing States

Author

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  • Zouhair Aït Benhamou

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

  • Lesly Cassin

    (EconomiX - EconomiX - UPN - Université Paris Nanterre - CNRS - Centre National de la Recherche Scientifique)

Abstract
This paper puts forward a modified OLG framework for high migration countries such as Caribbean islands, to link economic growth and demographic features. Our theoretical model captures the potential effects of migration on the households' choices in terms of savings, fertility and education, and thus on the accumulation of human and physical capital. Through a numerical analysis we study specifically five countries. We find that households in Jamaica, Haiti and Dominican Republic invest more in education for future generations and increase their fertility rate. Thus due to migration, their economic growth is driven by accumulation of efficient units of labor. For Barbados or Trinidad and Tobago, the benefits from education are dwarfed respectively by a low migration premium or a low level of remittances. Their economic growth is therefore driven by a high accumulation of physical capital. Second, we introduce frictions on the capital market in order to account for the imperfections in the interest rate adjustments to the marginal productivity of capital. For the studied islands, physical capital accumulation on the one hand and economic growth on the other hand show trade-offs between short-run and long-run if the frictions are reduced.

Suggested Citation

  • Zouhair Aït Benhamou & Lesly Cassin, 2018. "The effects of migration and remittances on development and capital in Caribbean Small Island Developing States," Working Papers hal-04141685, HAL.
    • Handle: RePEc:hal:wpaper:hal-04141685
    Note: View the original document on HAL open archive server: https://hal.science/hal-04141685
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    More about this item

    Keywords

    Migration; Capital Markets; Overlapping Generations Model; Caribbean; Small Island Developing States;
    All these keywords.

    JEL classification:

    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts

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