Abstract
AbstractThis paper studies the remittances’ effect on economic growth. Using panel data techniques, the authors estimate several specifications to provide support of such relationship for MENA countries over the period 1980–2009. The findings provide new robust evidence on how remittances are used in MENA countries and detect the main channels which may interfere in this process. Estimation outcomes show that the most important part of remittances is consumed and that remittances stimulate growth only when they are invested. Moreover, empirical results suggest that remittances can enhance growth by encouraging human capital accumulation. Human capital is therefore an effective channel through which remittances stimulate growth in MENA countries.
Highlights
International remittance inflows, or “The money that migrants send home to their families” have experienced a significant increase in developing countries over the past decades
Official international remittances to developing countries have grown dramatically in recent years from U.S $3.3 billion in 1975 to U.S $289.4 billion in 2007 (World Bank, 2009) making them the second largest source of external finance for developing countries after foreign direct investment (FDI).This represents about twice the amount of official aid received, both in absolute terms and as a proportion of GDP (Aggarwal, Demirguc-Kunt and Martinez Peria, 2010)
We describe the data and discuss the variables, tools and technique used to assess the effect of remittances on economic growth
Summary
International remittance inflows, or “The money that migrants send home to their families” have experienced a significant increase in developing countries over the past decades. According to the World Bank (2006) if remittances sent through informal channels are included in official transfers, total remittances could be as much as 50 per cent higher than the official record. These unofficial channels are attractive because the cost of transferring funds through official channels is high for some countries. In 2009, workers’ remittance receipts of MENA countries stood at $8,536 billion, much higher than total official flows and private non-FDI flows (figure 1)
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