Social Capital, Remittances and Growth

Remittances are growing substantially in the developing world, surpassing foreign aid and, in several nations, reaching more than 20 per cent of their Gross Domestic Product. The relevance of these capital inflows for the recipient economies has been discussed in previous work, but the evidence is, at best, inconclusive. This article contributes to the literature by providing new findings on the effects of remittances on growth through social capital development. Using a more inclusive and complete set of social capital indicators, our results show that the effectiveness of remittances on long-term growth is enhanced by the presence of social capital indicators. Our results are consistent and robust when using different econometric techniques.