Remittances and Energy Consumption: Evidence from Morocco
| Author | Gökhan Demirtaş,Selçuk Akçay |
| Date | 01 December 2015 |
| DOI | http://doi.org/10.1111/imig.12202 |
| Published date | 01 December 2015 |
Remittances and Energy Consumption:
Evidence from Morocco
Selcßuk Akcßay*and G€
okhan Demirtasß*
ABSTRACT
The main purpose of this study is to empirically investigate the co-integration and causal rela-
tionship between international remittances and energy consumption in the context of Morocco.
Previous empirical studies associated remittances with various macroeconomic and social vari-
ables. To our knowledge, this is the first study that examines the causality between remittances
and energy consumption in Morocco. The study finds a long-run equilibrium relationship
between remittances and energy consumption. The results indicate that remittances influence
energy consumption directly both in the short run and long run, and influence energy con-
sumption indirectly through industrialization and economic growth in the long run.
INTRODUCTION
According to the World Bank (2011), in 2010, 215 million migrants remitted US$440.1 billion to
their home countries. Recently, in many developing countries, international remittance inflows sur-
pass total official development aid (ODA) and foreign direct investments (FDI). The effect of remit-
tances –the personal transfers of money by workers living abroad to families and relatives in the
home country –on economic development is a subject of considerable policy and academic interest
and has been studied extensively.
International remittances might potentially influence the economic development of recipient coun-
tries. Two opposing views on the impact of remittances in development prevail in the current litera-
ture: optimistic and pessimistic (De Hass, 2007). Followers of the optimistic view believe that
remittances may directly and indirectly spur development. Conversely, advocates of the pessimistic
view highlight the adverse effect of remittances on development. For the summary of the potential
positive and negative effects of remittances on economic and social variables, see Khoudour-
Casteras (2007) and Sugiyarto and Pernia (2012).
Cotula and Toulmin (2004) note that the nexus between remittance and economic development
can be examined on three levels: macro, meso and micro. Development economists attribute prob-
lems of economic growth to lack of capital and foreign exchange constraints. At the macro level,
remittances can increase international reserves and domestic consumption; contribute to financial
sector development; enhance credit worthiness; increase access to capital; and strengthen a nation’s
balance of payment position. According to Ratha (2009) and Frankel (2011) international
remittances are more stable than capital flows and they contribute to balance of payments and eco-
nomic stability of recipient countries. Furthermore, at the meso level, remittances can be used for
funding social projects such as schools, health centers, religious buildings, wells and irrigation
canals. Finally, at the micro level, international remittances provide important income support and
*Afyon Kocatepe University, Department of Economics, Afyonkarahisar, Turkey.
doi: 10.1111/imig.12202
©2015 The Authors
International Migration ©2015 IOM
International Migration Vol. 53 (6) 2015
ISSN 0020-7985Published by John Wiley & Sons Ltd.
self-insurance for millions of household in developing countries. Contrary to ODA money, which
must be handled through official agencies and governments, international remittances directly reach
the intended beneficiaries.
Many recent empirical studies have shed light on the positive and negative impacts of remit-
tances on macroeconomic and social variables. Macro and micro level empirical studies (country
case studies using household surveys), supporting the optimistic view, reveal that remittances
reduce income inequality, (Mughal, 2013), poverty (Jimenez-Soto and Brown, 2012), infant mortal-
ity (Zhunio et al., 2012), child labour (Ebeke, 2010), malnutrition (Lu, 2012), and output volatility
(Chama et al., 2009). Additionally, they promote economic growth (Cooray, 2012), financial sector
development (Aggarwal, et al., 2011), and capital accumulation (Senbeta, 2013); increase the
propensity to save (Ziesemer, 2012), aggregate labour supply (Posso, 2012), domestic investment
(Blouchoutzi and Nikas, 2010), tax revenues (Abdih et al., 2011), and life expectancy (Zhunio
et al., 2012); improve primary and secondary school attendance (Zhunio et al., 2012); and maintain
macroeconomic stability (Spatafora, 2005).
However, macro and micro level empirical studies supporting the pessimistic view suggest that
remittances impede economic growth through the Dutch Disease effect (Lartey et al., 2012); lower
tax revenues (Ziesemer, 2012); reduce the labour supply (Airola, 2008), fertility rate (Zhunio et al.,
2012), and agricultural activities (Gray and Bilsborrow, 2014); lead to public moral hazard (Ebeke,
2012); decrease external trade competitiveness (Chowdhury and Rabbi, 2014); increase corruption
(Berdiev et al., 2013); appreciate national currency (Lartey et al., 2012) and stimulate inflation
(Jansen et al., 2012). Consequently, recent macro and micro level empirical studies provide mixed
results on whether remittances contribute to or slow economic development.
In 2010, developing countries received approximately US$325.5 billion international remittances
(World Bank, 2011). Out of the US$325.5 billion, US$ 39.7 billion was remitted to Africa,
accounting for 2.6 per cent of the continent’s GDP in 2009 (US$21.5 billion to Sub-Saharan
Africa; US$18.2 billion to North Africa). In 2010, the top two remittance recipient countries in
North Africa were Egypt and Morocco. Table 1 reports the size and the share of remittance inflows
into North Africa as percentage of GDP during the last three decades. According to World Bank
(2011), in 2010, the stock of emigrants was 3,016.6 thousands and the stock of emigrants as a
percentage of population was 9.3 per cent in Morocco. In 2010, Morocco received international
remittances equivalent to US$6,423 million (35% of the total flow into North Africa) which
accounts for 7.07 per cent of the country’s GDP (World Bank 2011).
The selected economic and social indicators for Morocco are given in Table 2. The major exter-
nal receipts of Morocco are exports, tourism and international remittances. Morocco received the
TABLE 1
REMITTANCE INFLOWS INTO NORTH AFRICA: SIZE (US$ MILLION) AND SHARE (AS % GDP)
Country
1980 1990 2000 2010
Size
%of
GDP Size
%of
GDP Size
%of
GDP Size
%of
GDP
Egypt 2,696 11.70 4,284 9.93 2,852 2.85 12,453 5.68
Morocco 1,054 5.59 2,006 7.77 2,161 5.83 6,423 7.07
Tunisia 319 3.64 551 4.48 796 3.70 2,063 4.64
Algeria 406 0.95 352 0.56 790 1.44 2,044 0.12
Source: World Bank (2013)
126 Akc
ßay and Demirtas
ß
©2015 The Authors. International Migration ©2015 IOM
To continue reading
Request your trial