Three essays on cross-border movements

Gouri Suresh, Shyam Sunder
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This dissertation studies migration and remittances through a macroeconomic framework. In the first chapter, I compare the impact of national and regional borders on the migration decisions of agents. Migration between regions within a country is observed to be higher than migration between countries; moreover, both types of migration respond similarly to differences in economic opportunities. These observations are analyzed with the aid of a symmetric two-country dynamic general equilibrium model with labor mobility. The model is solved using dynamic programming and estimates of the latent cost of crossing borders are obtained through the method of simulated moments. The results show that the mean moving cost associated with crossing an international border is more than twice that of crossing a regional border. One important consequence of this high cost is that the mere presence of a national border decreases aggregate welfare by about 0.15% in terms of annual consumption for countries such as Sweden and Denmark. In the second and third chapters, I analyze how remittances by emigrants to their home countries affect welfare, consumption, savings, investment and the structure of production between traded and non-traded sectors in developing economies. For both these chapters, I solve a macroeconomic model with an endogenous remittance decision. However, while the second chapter considers remittances driven by investment or savings motives, the third chapter considers altruistic remittances.