The Impact of Remittances on Economic Growth and Development in Africa
AbstractFor more than half a century, there have been heated debates on the sources of economic growth in developing economies. The perceived factors of economic growth have ranged from surplus labor to capital investment and technological change, foreign aid, foreign direct investment, investment in human capital, increasing returns from investment in new ideas and research and development. The positive or negative impacts of the above listed traditional sources of economic growth have been well documented in literature. Other researchers have also considered the importance of institutional factors such as the role of political freedom, political instability, voice and accountability on economic growth and development. Despite the increasing importance of remittances in total international capital flows, however, the direct or indirect relationship between remittances and economic growth has not been adequately studied. This study explores the aggregate impact of remittances on economic growth within the conventional neoclassical growth framework using an unbalanced panel data spanning from1980 to 2004 for 37 African countries. We find that remittances boost growth in countries where the financial systems are less developed by providing an alternative way to finance investment and helping overcome liquidity constraints.
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Bibliographic InfoPaper provided by Middle Tennessee State University, Department of Economics and Finance in its series Working Papers with number 200802.
Date of creation: Feb 2008
Date of revision:
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Web page: http://www.mtsu.edu/~berc/working/Economics_Working_Papers.html
More information through EDIRC
Workers’ Remittances; Economic Growth; Panel Data; Fixed-Effects; Random-Effects; Arellano-Bond; Quantile Regression;
Find related papers by JEL classification:
- E21 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- G22 - Financial Economics - - Financial Institutions and Services - - - Insurance; Insurance Companies
- J61 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Geographic Labor Mobility; Immigrant Workers
- O16 - Economic Development, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
This paper has been announced in the following NEP Reports:
- NEP-AFR-2008-03-01 (Africa)
- NEP-ALL-2008-03-01 (All new papers)
- NEP-DEV-2008-03-01 (Development)
- NEP-FDG-2008-03-01 (Financial Development & Growth)
- NEP-MAC-2008-03-01 (Macroeconomics)
- NEP-MIG-2008-03-01 (Economics of Human Migration)
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