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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.

An overview of the cointegration approach to econometric specification and estimation is provided. A non‐technical approach is adopted, and is intended to serve as an entry into this important new literature for the reader with no background knowledge of the subject but with some limited knowledge of econometrics. Particular emphases are given to the rationale for using cointegration techniques in the estimation of economic relationships, to providing intuitive explanations of the concepts and techniques, and to demonstrating their applications in practice. Reference is made throughout to other articles which explain particular methods or recent developments more formally and fully than is possible here. Finally, a simple application of cointegration techniques to the estimation of the consumption function is provided.