Remittances and Technology Spillovers: An Empirical Evidence from Remittance-Receiving Countries

Abstract

AbstractThe present study examines the short-run and long-run relationship between international remittances and technology spillovers. The study uses the fixed effects method for short-run analysis and the panel ARDL method for long-run analysis using the data for 27 developed and developing countries. The study’s unique contribution to literature is its perspective on technology spillovers through remittance investments in human capital and complementary assets. The short-run results reveal that remittance investments in human capital follow an inverted U-shaped relationship, and that remittance investments in complementary assets follow a U-shaped relationship, with technology spillovers. The analysis for the long run reveals a positive relationship between remittance investments in human capital and technology spillovers. Additionally, we find that there is a substitutionary relationship between remittances and human capital, and a complementary relationship between remittances and complementary assets. The study evidences that through the spillover generation, remittances indirectly have positive growth effects. Therefore, from a policy perspective, it is strongly recommended that the investment potential of remittances be increased in high-skilled human capital in terms of skill acquisition, and in complementary assets in terms of investment in more technology-oriented investments.KeywordsRemittancesTechnical spilloversHuman capitalComplementary assetsPanel ARDL