Emigrants' Remittances, Non‐Traded Goods and Economic Welfare in the Source Country

This article analyses the welfare effect of emigration on a source country whose output consists in part of non‐traded goods but where emigrants make remittances to the source country and the remittances are used solely for consumption. Within this framework, the welfare effect of emigration is indeterminate, depending on the magnitude of remittances. In particular, welfare will fall where remittances merely maintain source country nominal income at its pre‐emigration level. Where remittances are sufficiently large they can compensate for the emigration‐induced disruption of internal trade in internationally non‐traded goods.