Remittances and Income Growth: Empirical Evidence from Low- and Middle-Income Countries in Sub-Saharan Africa

Sub-Saharan Africa (SSA) faces a paradox in which record-high remittance inflows coexist with persistent poverty and stagnant economic growth. Existing research exhibits a significant gap, focusing almost exclusively on inward diaspora flows whilst neglecting the domestic impact of outward remittances and providing contradictory evidence on how these effects vary across different national income tiers. To address this gap, this study examines the bidirectional impact of remittances on per capita income for 30 SSA countries over the period 2000 to 2023, employing an ex-post facto research design and robust econometric techniques, including Pooled OLS, Fixed Effects, and the Driscoll–Kraay estimator, to account for cross-sectional dependence and heteroskedasticity. The findings indicate that both inward and outward remittances significantly enhance per capita income, lending support to the New Economics of Labour Migration (NELM) framework. Notably, inward remittances exert a substantially greater impact in low-income nations ($248.03) compared to middle-income countries ($35.76), supporting the findings of Issahaku et al. (2018). Furthermore, outward remittances unexpectedly exhibit a greater magnitude of impact than inward flows across all models, addressing a significant gap in the literature identified by Aja et al. (2024). The study concludes that whilst remittances are vital strategic resources for overcoming market failures, their benefits are contingent upon macroeconomic stability. Recommendations include prioritising macroeconomic stability and financial development, implementing structural reforms to channel funds into productive investments such as infrastructure, and decisively reducing the region's high transaction costs. Policymakers should implement structural reforms and trade liberalisation to create an enabling environment for channelling remittances from mere consumption into productive investments such as housing, infrastructure, and human capital development.