Remittances and Federal Government Spending: Evidence from Mexico

Abstract

We develop an empirical analysis of the effect of remittances on the size and composition of government spending. Using data from 28 years in Mexico, we show that remittances increase the provision of public goods and social security transfers. We also find evidence that the proportion of social spending in relation to programmable spending falls as remittances increase in Mexico. This evidence shows that remittances not only affect the size but also the composition of government spending changing who benefits the most from public spending in Mexico.