Spanish emigrant remittances and their impact on public finances, 1870-1936

This paper examines the impact of remittances from Spanish emigrants in the Americas on Spain’s public finances between 1870 and 1936. Using a newly reconstructed remittance series, it analyses whether these inflows contributed to tax revenue and public expenditure in real terms. A Vector Error Correction Model is employed to assess both short- and long-term effects on fiscal variables, distinguishing between direct and indirect taxation. The findings sug-gest that remittances bolstered direct tax revenues, particularly through wealth accumulation and investment. At the same time, their impact on the purchasing power of indirect taxation was limited due to Spain’s underdeveloped fiscal system and informal economy. Additionally, evidence of a short-term crowding-out effect on public spending is found, aligning with recent literature on remittances substituting for state intervention. These insights contribute to broad-er discussions on the historical role of remittances in state capacity and fiscal development.