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Remittances, Human Capital, and Economic Growth: Panel Data Evidence from Asia and Sub-Saharan Africa

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  • Chakra Pani Acharya

    (National Planning Commission Secretariat, Kathmandu, Nepal)

  • Roberto Leon-Gonzalez

    (National Graduate Institute for Policy Studies, Tokyo, Japan)

Abstract

We examine the impact of remittances on economic growth using panel data (1975-2014) for 18 countries in Asia and Sub-Saharan Africa (SSA) that are similar in size and development level. We allow for heterogeneous production functions across countries and calculate the average marginal effects of remittances using the panel dynamic ordinary least squares estimator. The estimation results show that remittances increase growth significantly, especially through investments in human capital. In addition we find that: (i) remittances have a modest impact on growth when controlling for physical and human capital channels through which remittances potentially affect output growth; (ii) when we do not control for human capital the effect is larger regardless of the sub-samples considered - the elasticity of output with respect to remittances is 7.3 percent in the full sample, and 18.6 percent among Asian countries ; (iii) remittances have a significant positive long-run effect on human capital formation regardless of the sub-samples considered but the effect on physical capital accumulation is significant only among middle income and Asian countries. The findings suggest that channeling the remittances towards investments in physical capital and adoption of new knowledge, skills and technology is crucial for high economic growth in low income countries.

Suggested Citation

  • Chakra Pani Acharya & Roberto Leon-Gonzalez, 2018. "Remittances, Human Capital, and Economic Growth: Panel Data Evidence from Asia and Sub-Saharan Africa," GRIPS Discussion Papers 18-01, National Graduate Institute for Policy Studies.
    • Handle: RePEc:ngi:dpaper:18-01
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    References listed on IDEAS

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    1. Chakra P ACHARYA & Roberto LEON-GONZALEZ, 2013. "The Impact of Remittance on Poverty and Inequality: A Micro-Simulation Study for Nepal," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(9), pages 1061-1080.
    2. Chakra P. ACHARYA & Roberto LEON-GONZALEZ, 2013. "The Impact of Remittance on Poverty and Inequality: A Micro-Simulation Study for Nepal," Asian Journal of Empirical Research, Asian Economic and Social Society, vol. 3(9), pages 1061-1080, September.
    3. Adams, Richard H. & Cuecuecha, Alfredo, 2013. "The Impact of Remittances on Investment and Poverty in Ghana," World Development, Elsevier, vol. 50(C), pages 24-40.
    4. Richard Adams, 2011. "Evaluating the Economic Impact of International Remittances On Developing Countries Using Household Surveys: A Literature Review," Journal of Development Studies, Taylor & Francis Journals, vol. 47(6), pages 809-828.
    5. Ahmed, Faisal Z., 2012. "The Perils of Unearned Foreign Income: Aid, Remittances, and Government Survival," American Political Science Review, Cambridge University Press, vol. 106(1), pages 146-165, February.
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    Cited by:

    1. Peter Nderitu GITHAIGA, 2019. "Foreign Remittances, Private Sector Investment and Banking Sector Development," Journal of Economics and Financial Analysis, Tripal Publishing House, vol. 3(2), pages 85-112.

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