The Golden Rule of Capital Accumulation with Workers' Remittances

Abstract

This paper studies the impact of workers remittances on capital accumulation. We consider an overlapping-generations economy in which labor is endogenous and education is paid by parents. Children can migrate to another country and altruistically send remittances to family. In the recipient country, remittances reduce labor supply, domestic savings and capital accumulation with a country-specific impact on the gap between the competitive long-run equilibrium and the optimum. Appropriate taxes and subsidies allow a government to decentralize the optimum. We calibrate the model for 30 recipient countries to quantify the impact of remittances and the policy recommendation.