Diaspora transferts finance et développement économique

Remittances by migrants to their countries of origin constitute the largest source of external finance for developing countries after foreign direct investment . To shed light on this important fact, in this paper we consider a model of micro-foundations of the links between remittances finance and endogenous growth. Our theoretical set up helps to show how local financial system development and the quality of institutions influence a country’s capacity to take advantage of remittances. Among others new findings , we show that remittances foster economic growth in countries with less developed financial sector by providing a substitute tool to finance investment and contribute to overcome liquidity constraints and help undertake profitable investment.