Trade-off Between Emigration and Remittances in the Portuguese Economy

• Autor(a) principal: Pereira, Alfredo M.
• Data de Publicação: 1989
• Tipo de documento: Artigo
• Idioma: eng
• Título da fonte: Repositório Científico de Acesso Aberto de Portugal (Repositórios Cientìficos)
• Texto Completo: http://hdl.handle.net/10362/84672

This paper develops an optimal growth model in which resident labor force is allowed to emigrate due to wage differentials in the home and host countries and send back remittances. The model is implemented with Portuguese data to determine the welfare and growth effects of the substantial emigration flow of the 1960's, as well as the potential effects of the liberalization of labor force movements that will follow the recent integration of Portugal in the European Economic Comunity (EEC). Simulation results suggest that past emigration has positive welfare effects, which means that the positive effects of remittances dominate the negative welfare effects of de-population. However, the annual growth of domestic production has been slowed down by about half a percentage point. In turn, the liberalization of Portuguese labor force movements in the EEC is likely to provoke a substantial flow of new emigrants if the current trend of low increase in the domestic real wages persists. New emigration will at best tend to stagnate domestic production as remittances will become increasingly important. Still, under most scenarios new emigration is welfare-improving for the resident population.