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( Maurizio Bussolo ),( Denis Medvedev ) 세종대학교 경제통합연구소 (구 세종대학교 국제경제연구소) 2008 Journal of Economic Integration Vol.23 No.3
Econometric analysis established a negative relationship between labor supply and remittances in Jamaica. We incorporate this ex-post evidence in a general equilibrium model to investigate economy-wide effects of increased remittance inflows. In this model, remittances reduce labor force participation by increasing reservation wages of recipients. This exacerbates the real exchange rate appreciation, hurting Jamaica`s export base and small manufacturing importcompeting sector. Within the narrow margins of maneuver of a highly indebted government, we show that a revenue-neutral policy response of a simultaneous reduction in payroll taxes and increase in sales taxes can effectively counteract these potentially worrisome effects of remittances.