Introduction: Inequality, Economic Growth and Remittances in Latin America and the Caribbean

Abstract

Inequality has been a long-standing concern for policymakers and academic scholarship. Inequality has the potential to cause social and distributional conflict among different groups in society, political instability and economic shocks. Does inequality hurt economic growth? The answer to this question is not settled. We contribute to this debate by investigating the effect of the intersection of inequality and remittances on economic growth using a panel of Latin America and the Caribbean (LAC) countries. Our panel model estimates show that while inequality significantly reduces economic growth, remittances can ameliorate the adverse impact of inequality on economic growth. This finding suggests that developing countries that have access to remittance flows have the potential to attenuate the negative economic, social and political effects of inequality. Thus, policies that reduce the transaction cost of remittances, which would make it easier for migrants to increase the size of remittance flows would offer a lifeline to developing countries that faced high and persistent inequality. The final part of this introductory chapter discusses the contribution of each chapter in this collection.