Susan Pozo

Migration, Remittances, and Male and Female Employment Patterns

Little is known about the labor market impacts of workers’ remittances, despite their magnitude in countries with considerable outmigration. Reports that families receiving international remittances severely curtail their work efforts are fairly common in the popular press (e.g., Robert Frank, 2001). Yet, we lack rigorous analyses of how male and female labor supplies respond to increases in remittance income to either support or refute these anecdotal observations. According to the neoclassical model of labor-leisure choice (Mark R. Killingsworth, 1983), remittances—a source of nonlabor income—may lift budget constraints, raise reservation wages, and, through an income effect, reduce the employment likelihood and hours worked by remittance-receiving individuals. The receipt of remittances is usually preceded by the out-migration of working-aged household members, however, which may induce changes in the labor supply of nonmigrating household members in order to compensate for forgone income or to defray migration-related expenses. Distinguishing the disruptive effect from the income effect of remittance inflows is problematic, as most surveys do not contain detailed information on household outmigration and remittance receipt. To the extent that these two effects are expected to have opposite impacts on labor supply, however, we can assess which effect dominates. The impact of remittances on the decision to work has been previously examined by Edgard Rodriguez and Erwin R. Tiongson (2001) in Manila and by Edward Funkhouser (1992) in Managua. Without accounting for the endogeneity of remittances with respect to labor supply, they conclude that remittances reduce employment. Funkhouser also finds that remittances slightly increase self-employment. While informative, these studies focus on the decision to work and do not consider that, without altering employment rates, remittances may change the hours worked and/or the type of work performed in the receiving economy. Furthermore, the impact may be different on male and female labor supplies and responsiveness to remittance income may vary from rural to urban areas. Using data from Mexico—a country with a large and growing remittance inflow—we address the following questions: How does the employment status and hours worked by men and women vary owing to international remittances? Do male and female labor supplies differ across various types of employment in rural versus urban areas due to higher remittance inflows?

Conditional Exchange-Rate Volatility and the Volume of International Trade: Evidence from the Early 1900s

Exports from Britain to the United States from 1900 to 1940 are examined to ascertain the effect of exchange-rate volatility on the volume of trade. In addition to using a rolling standard deviation measure of exchange-rate uncertainty, the conditional variance of the exchange-rate series modeled.as a generalized autoregressive conditional heteroskedastic process is used to generate an alternative measure of exchange-rate uncertainty. The results of estimation using the two measures of exchange-rate volatility suggest that increases in the volatility of the real exchange rate reduce the volume of trade. Copyright 1992 by MIT Press.

Remittance Receipt and Business Ownership in the Dominican Republic

Using household-level data from the Dominican communities in the Latin American Migration Project (LAMP-DR7), we examine the links between remittance receipt and business ownership. We find that while the existence of a family business attracts remittance inflows, these monetary funds are associated with a reduced likelihood of business entrepreneurship. These results are consistent with various hypotheses regarding remittances and business investments. First, remittances may be motivated by the availability of investment opportunities in the home community. Second, remittances may respond to a bequest motive on the part of the emigrant, who may wish to lay claim on family assets when returning home. Lastly, remittances may cause an income effect that reduces family labour force participation and, correspondingly, the likelihood of family-run business investments.

Exchange-rate uncertainty and workers' remittances

A panel of nine Western Hemisphere nations is employed to test the proposition that the remittances of immigrants respond to risk variables, in particular to exchange-rate uncertainty. To estimate annual exchange-rate uncertainty, a nonparametric estimator based on monthly exchange rate returns is used. Also the instrumental variables procedure of Pagan and Ullah (Journal of Applied Econometrics, 3, 87–105, 1988) is employed to insure that the conclusions are robust to possible error in the measurement of exchange-rate uncertainty. The results give credence to the ‘new economics of migration’ approach which argues that immigrants are highly motivated by portfolio variables.

Migration, Remittances, and Children’s Schooling in Haiti

The authors examine the impact of remittances on the schooling of children in various Haitian communities with a high incidence of out-migration. After addressing the endogeneity of remittance receipt, they find that, in some communities, remittances raise school attendance for all children regardless of whether they have household members abroad. However, in other communities, this effect is observed only among children living in households that do not experience any family out-migration. Hence, while the receipt of remittances by the household lifts budget constraints and raises the children’s likelihood of being schooled, the disruptive effect of household out-migration imposes an economic burden on the remaining household members and reduces children’s school attendance. As such, remittances ameliorate the negative disruptive effect of household out-migration on children’s schooling in some migrating communities in Haiti and, therefore, contribute to the accumulation of human capital in the midst of extreme poverty.

Statistical distributions and the identification of currency crises

Abstract We use extreme value theory to identify periods of currency crisis for a broad cross-section of Asian, European, and Latin American countries. We argue that our methodology improves upon the more conventional methodology for defining currency crises because fewer parametric assumptions need to be satisfied. We compare the incidence of currency crises using the conventional method with the incidence obtained using our method. We conclude that identifying currency crises using extreme value theory is a good alternative to the conventional method.

FOREIGN EXCHANGE RATES AND FOREIGN DIRECT INVESTMENT IN THE UNITED STATES

The hypothesis that foreign direct investment into the United States responds to variations in exchange-rate levels and to exchange-rate uncertainty is tested for the period 1976-1998. We account for nonstationarity and cointegration in the data series and use conditional measures of exchange-rate uncertainty. While a long-run relationship exists among foreign direct investment in-flows as a share of GNP, the real exchange rate, and the GARCH measure of exchange-rate volatility, we find no discernible link between the real exchange rate and inward foreign direct investment in the short run. We also conclude that foreign direct investment decreases in response to increases in exchange-rate uncertainty in the short run when we use a conditional measure of exchange-rate uncertainty.

Requiring a math skills unit: Results of a randomized experiment

Research spanning three decades supports what many experienced instructors of economics have long concluded—math matters. Students with greater mathematics preparation attain higher test scores in introductory economics (Steven R. Cox, 1974; Gordon Anderson et al., 1994; Charles L. Ballard and Marianne F. Johnson, 2004). While all levels of competency seem to explain performance, Ballard and Johnson (2004) find “mastery of extremely basic quantitative skills is among the most important factors for success in introductory microeconomics.” Furthermore, research shows that mathematical competency reduces anxiety in economics classes (Mary Ellen Benedict and John Hoag, 2002). To the extent that anxiety may interfere with the cognitive process, an effective mechanism to correct for math deficiencies is desirable. The research supports that there may be simple methods economics instructors can use to improve students’ learning. Common techniques include assigning a math chapter in the text, completing a math unit at the university skills center, or completing a computer unit that reviews and tests basic math skills. These alternatives, however, require effort from all students, including those possessing good math skills. Consequently, many instructors make these math assignments optional, while particularly encouraging those with weaker math skills to complete them. But this procedure is also problematic, as students most in need of the math review are often least likely to put forth effort when there is no tangible reward. In this paper, we report on the results of a controlled experiment with random assignment, which tests whether giving a grade incentive to complete a math skills unit results in higher overall achievement in introductory economics. We find that students provided with the incentive get higher exam scores. The achievement gain is most noticeable for students lower in the grade distribution. Students with the weakest backgrounds and, therefore, with the greatest marginal gains from completing the math unit, are more likely to derive the benefits from that effort.

Exchange-rate volatility and trade: a semiparametric approach

We use a gravity model to analyse the impact of exchange-rate volatility on the volume of bilateral international trade. Semiparametric regression methods are applied to the pooled data for over 200 countries. Our results indicate that volatility affects trade negatively although at very high level of volatility the effect diminishes and eventually becomes statistically indistinguishable from zero. Countries apparently find avenues to mitigate the detrimental impact of exchange rate uncertainty when volatility attains very high levels. These results help reconcile the contradictory findings often found in the literature on the impact of exchange-rate uncertainty on trade volume.

Exchange rates and US direct investment into Latin America

This paper analyzes the impact of exchange rate levels and exchange rate uncertainty on US foreign direct investment into Latin America. By decomposing exchange rate uncertainty into temporary (short-run) and permanent (long-run) components, we further explore whether the nature of uncertainty matters. Our empirical findings support the view that exchange rate uncertainty has a negative impact on US investment flows into Latin America. Moreover, it is the persistency in uncertainty rather than transitory uncertainty that mostly deters foreign investment. In contrast, investors do not appear to be affected by discrete movements in exchange rate levels.