Remittances, Development Level, and Long-Run Economic Growth

• Main Authors: Kristina Matuzeviciute, Mindaugas Butkus
• Format: Article
• Language: English
• Published: MDPI AG 2016-12-01
• Series: Economies
• Subjects: remittances; long-run economic growth; development level
• Online Access: http://www.mdpi.com/2227-7099/4/4/28

This paper seeks to enrich the field of research on the topic of the impact of remittances on long-run economic growth. Using an unbalanced panel data covering a sample of 116 countries with different development levels over the period 1990–2014, we studied the interaction between remittances and the level of economic development, as well as its impact on long-run economic growth—because the impact of remittances could be influenced by the development level of the receiving countries. In parallel, we explored the hypothesis about diminishing a country’s capacity to use remittances for promoting long-run economic growth as the abundance of remittances increases. To control the endogeneity while estimating the impact of remittances on long-run economic growth, we used OLS (ordinary least squares) with FD (first differences) transformation and FE (fixed effects) approaches and other controls of long-run growth. Our results showed that in general remittances have a positive impact on long-run economic growth, but the impact differs based on the country’s economic development level and the abundance of remittances in the economy.