In this paper we ask the question of whether remittance inflows may have played some role in the premature deindustrialization observed in many developing countries over the past few decades. We analyze the question using data for the Philippines, a country that has experienced both large inflows of remittances and deindustrialization. We also document a number of important facts about remittances and deindustrialization in the Philippines. We find evidence of the Dutch disease and deindustrialization associated with remittance inflows. Specifically, an increase in remittance inflows raises the price level, appreciates the home currency in real terms, and reduces the share of value added of industry in GDP of the home country in the medium run. In the short run, however, the effects of the remittance shock are somewhat more favorable: output increases and industrialization is promoted.
Tuan Khai Vu (Fri,) studied this question.