Migration, Remittances and Accumulation of Human Capital with Endogenous Debt Constraints

This paper studies the impact of migration and workers’ remittances on human capital and economic growth when young individuals face debt constraints to finance education. We consider an overlapping generations model a la de la Croix and Michel (2007). In this no-commitment setting, education is the engine of growth. Individuals may choose to default on their debt and be excluded from the asset market. We show that remittances tend to tighten the borrowing constraints for a given level of interest rate, but may enhance growth at the equilibrium. The model replicates both negative and positive impacts of migration and remittances on economic growth underlined by the empirical literature. We calibrate the model for 30 economies.