Emigration and welfare in an economy with foreign capital

This paper examines the effects of emigration on welfare of the remaining residents (R) in an economy producing traded (T) and non-traded (N) goods with the aid of foreign and domestic capital. While the existing literature has established that emigration reduces the welfare of those left behind when foreign capital is not present in the economy, the analysis below suggests that, with foreign capital, the effect on welfare may well be reversed. The paper also compares the welfare implications of remittance flows back to the source country when they are used to finance consumption and when they are used to finance capital accumulation. (C) 1998 Elsevier Science B.V. All rights reserved.