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House Prices and International Remittances: Evidence from Colombia

Author

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  • Sergi Basco
  • Jair N. Ojeda-Joya

Abstract

This paper empirically examines the effects of international remittances on local house prices. International remittances are one of the main drivers of capital inflows in emerging economies. We consider the salient case of Colombia. In the last two decades, remittances have represented, on average, 2% of GDP. One main advantage of studying the Colombian housing market is that we are able to construct a panel of housing returns at the project level. By exploiting the regional and temporal variation of international remittances, we document that they have large heterogeneous effects across regions and housing types. In particular, we find that remittances inflows have positive effects on house prices growth in high unemployment municipalities and low-quality housing. These results hold when considering an IV-strategy using remittances to Latin America countries (excluding Colombia). We develop a stylized model with borrowing constrained households and segmented housing markets to rationalize these results. Our findings suggest that international remittances are an important source of liquidity for credit constrained households. RESUMEN: Este artículo examina empíricamente el efecto de las remesas internacionales en los precios de la vivienda en Colombia. Las remesas internacionales son uno de los principales componentes de los ingresos de capital en economías emergentes. Consideramos el caso relevante de Colombia ya que, en las últimas dos décadas, los ingresos de remesas han representado, en promedio, el 2% del Producto Interno Bruto (PIB). Una de las principales ventajas de estudiar el mercado de vivienda colombiano es la posibilidad de construir un panel de precios de vivienda nueva al nivel de proyectos individuales. Mediante el estudio de las variaciones temporales y regionales de las remesas internacionales, documentamos que estas tienen efectos heterogéneos significativos para las diferentes regiones y tipos de vivienda. En particular, encontramos que los ingresos de remesas tienen efectos positivos en los precios de la vivienda en regiones con alto desempleo y en zonas de estrato bajo. Los resultados se mantienen cuando usamos una estrategia de estimación con variables instrumentales mediante el uso de ingresos de remesas a Latinoamérica (excluyendo a Colombia). Desarrollamos un modelo estilizado con restricciones de endeudamiento para las familias y mercados segmentados de vivienda para entender estos resultados. Estos resultados sugieren que las remesas internacionales son una fuente importante de liquidez para las familias con restricciones de endeudamiento.

Suggested Citation

  • Sergi Basco & Jair N. Ojeda-Joya, 2024. "House Prices and International Remittances: Evidence from Colombia," Borradores de Economia 1273, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:1273
    DOI: 10.32468/be.1273
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    References listed on IDEAS

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    More about this item

    Keywords

    House Prices; International Remittances; Borrowing Constraints; Instrumental Variables; Precios de vivienda; remesas internacionales; restricciones de endeudamiento; variables instrumentales;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F44 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Business Cycles
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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