Remittances: Dutch disease or export-led growth?

The literature on remittances and growth has thus far established a positive link between remittances and overall economic growth in recipient countries. We identify the main transmission channel through which remittances seem to exert their growth-enhancing effects: the 'export-led growth' channel using a methodology that exploits both cross-country and within-country cross-industry variation, and correcting for the endogeneity of remittances by constructing a set of external instruments. We find that remittances are conducive to the relative growth of exporting industries within teh manufacturing sector of recipient economies, contrary to what standard Dutch disease theory suggests. In doing so, we control for the potential complementarity effect between migrant networks and international trade.