2007年-世界发展银行全球_Do_Remittances_Have_a_Flip_Side__A_General_Equilibrium_Analysis_of_Remittances_Labor_Supply_Responses_and_Policy_Options_for_Jamaica_29页_468kb

Summary of "Do Remittances Have a Flip Side? A General Equilibrium Analysis of Remittances, Labor Supply Responses, and Policy Options for Jamaica"

Core Content

This paper investigates the potential negative effects of increased international remittances on Jamaica's labor supply and broader economy, using a computable general equilibrium (CGE) model calibrated to empirical findings from Kim (2006). It addresses the question of whether remittances, while beneficial to households, could have adverse macroeconomic consequences, particularly through their impact on labor market dynamics and the real exchange rate.

Main Findings

• Labor Supply Response: Empirical evidence from household surveys indicates that remittances reduce labor force participation by increasing reservation wages. This is consistent with the income effect, where higher non-labor income leads to reduced labor supply.

• Economic Effects of Remittances: Increased remittances lead to real exchange rate appreciation, which can hurt Jamaica's export competitiveness and negatively impact import-competing sectors. The model shows that this appreciation is exacerbated by the endogenous labor supply response, as higher wages reduce labor supply and increase the relative price of non-tradables.

• Sectoral Impact: The effects of remittances are uneven across sectors. The export base and small manufacturing sectors are particularly vulnerable to the appreciation of the real exchange rate. In contrast, service sectors, which dominate Jamaica's economy, are less affected due to their non-tradable nature.

• Policy Response: The paper proposes a revenue-neutral tax policy that simultaneously reduces payroll taxes and increases sales taxes. This policy aims to offset the negative labor supply effect of remittances by lowering labor costs and maintaining government revenue. The simulation suggests that this policy can almost completely sterilize the adverse labor supply effects of rising remittances, which is encouraging for a country with high unemployment.

Key Information

1. Jamaica's Labor Market Context

• Jamaica has experienced persistently high unemployment (around 20% in urban areas) and rising real wages (3.2% per year from 1992–2002).
• Labor market rigidity is relatively low compared to other Latin American and Caribbean countries, but certain regulations, such as minimum wage laws, still have negative effects on employment.
• The labor market is flexible in terms of hiring and firing, but high redundancy costs and strong union influence remain concerns.

2. Remittance Trends and Impact

• Remittances have grown significantly in Jamaica, reaching 14.3% of GDP in 2002 and almost 20% of GDP in 2003.
• Remittances finance 19.8% of household consumption and are a major component of current account financing.
• The growth of remittances has been 18.2% annually over the last decade, which is faster than GDP growth.

3. General Equilibrium Model

• The model is based on a neoclassical framework and incorporates endogenous labor supply decisions.
• It accounts for the income and substitution effects of remittances on labor supply and uses a Stone-Geary utility function to capture consumption-leisure trade-offs.
• The model highlights how increased remittances can lead to real exchange rate appreciation and Dutch disease effects, which negatively impact export-oriented sectors and reduce competitiveness.

4. Policy Implications

• A revenue-neutral tax policy (reducing payroll taxes and increasing sales taxes) is proposed to counteract the negative labor supply effects of remittances.
• This policy is feasible given Jamaica's highly indebted government, which has limited fiscal space.
• The simulation results suggest that such a policy can effectively mitigate the adverse effects of remittances on labor supply and economic growth.

Conclusion

The paper concludes that while remittances provide important financial support to households, they can have negative macroeconomic consequences in Jamaica, particularly through their impact on labor supply and the real exchange rate. However, a revenue-neutral tax policy that lowers labor costs and increases sales taxes can counteract these effects and support domestic labor demand, offering a promising policy tool for a country facing high unemployment and limited fiscal flexibility.