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Remittances and Economic Growth: A Quantitative Survey

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  • Cazachevici, Alina
  • Havranek, Tomas
  • Horvath, Roman

Abstract

Expatriate workers’ remittances represent an important source of financing for low- and middle-income countries. No consensus, however, has yet emerged regarding the effect of remittances on economic growth. In a quantitative survey of 538 estimates reported in 95 studies, we find that approximately 40% of the studies report a positive effect, 40% report no effect, and 20% report a negative effect. Our results indicate publication bias in favor of positive effects. Correcting for the bias using recently developed techniques, we find that the mean effect of remittances on growth is still positive but economically small. Nevertheless, our results uncover noticeable regional differences: remittances are growth-enhancing in Asia but not in Africa. Studies that do not control for alternative sources of external finance, such as foreign aid and foreign direct investment, mismeasure the effect of remittances. Finally, time-series studies and studies ignoring endogeneity issues report systematically larger effects of remittances on growth.

Suggested Citation

  • Cazachevici, Alina & Havranek, Tomas & Horvath, Roman, 2019. "Remittances and Economic Growth: A Quantitative Survey," MPRA Paper 96823, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:96823
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    Keywords

    remittances; economic growth; meta-analysis; publication bias; Bayesian model averaging;

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages

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