Abstract

Despite the importance of remittance inflows as potential source of incomes for recipient households and one of main contributors to the development process in various developing countries, their environmental effects have been largely neglected in empirical literature. To fill this gap, the current study proposes an extension of the conventional environmental Kuznets curve by performing a modified version based on remittance inflows in both low- and middle-income countries from 1980 to 2014. Using the novel method of moments quantile regression with fixed effect, the outcomes provide evidence of an inverted N-shaped Kuznets curve for remittances at higher carbon dioxide emitters in lower middle-income countries, proving that remittances allow recipient households to shift toward clean energy pattern (production/consumption). We find U-shaped curve for remittances from the 40th to 80th quantiles in upper middle-income countries along with monotonic negative effect on carbon dioxide emissions at highest quantiles (90th and 95th). No significant effect on environment has been outlined at lower carbon dioxide emitters for all panels. Regarding economic growth, an inverted N-shaped curve has been observed across all quantiles in upper middle-income countries and from lower to middle quantiles in low-income countries. Finally, financial development, as control variable, exerts significant mixed effect on carbon dioxide emissions, swung between positive at all quantiles in low- and upper middle-income countries and negative at lower quantiles in low-income countries. Some recommendations were further built in the present study.

Highlights

  • Remittances inflows to the developing countries have been considered as one of the potential sources of funding, susceptive to achieving the Sustainable Development Goals (SDG) defined in the post-2015 Agenda of the United Nations Development Programme (UNDP).The importance attributed to remittances comes from the surge of their value during recent decades, reaching a large share of GDP in many developing economies and that become an important source of income for the recipient households (Rahman et al, 2019; Goschin, 2014; Meyer and Shera, 2016)

  • The main purpose of this study is to investigate whether remittances inflow could affect the environment in developing countries

  • Examining the relationship between remittances and environment is for great importance given the magnitude of this external funding in the developing countries, and that policy makers in LDCs are increasingly concerned with environmental degradation

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Summary

Introduction

Remittances inflows to the developing countries have been considered as one of the potential sources of funding, susceptive to achieving the Sustainable Development Goals (SDG) defined in the post-2015 Agenda of the United Nations Development Programme (UNDP).The importance attributed to remittances comes from the surge of their value during recent decades, reaching a large share of GDP in many developing economies and that become an important source of income for the recipient households (Rahman et al, 2019; Goschin, 2014; Meyer and Shera, 2016). Remittance inflows to LMICs have grown rapidly (8.8% in 2017 and 9.6 % in 2018), to reach US$ 529,640 million in 2018 up from US$ 31,058 million in 1990 and expected to record $570 billion in 2020 to become their largest source of foreign flows, often overtaking the value of foreign direct investments and official development aid (ODA) (World Bank (2018)). Given their sheer magnitude and significance for the development process, remittance inflows have aroused a heightened interest of economists and policymakers. A vast literature has treated the effect of remittances on different components of human capital (health, education, labor productivity...) (Azizi, 2018; Pilarova and Kandakov, 2017; Bouoiyour and Miftah, 2016 ), while another strand of studies have highlighted the relationship between remittances and financial development (Opperman and Adjasi, 2019; Coulibaly, 2015; Brown et al, 2013)

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