Macroeconomic Determinants of Workers' Remittances and Compensation of Employees In Sub-Saharan Africa

Abstract

In this paper, an attempt has been made to identify the macroeconomic determinants of migrant remittances received in SubSaharan Africa (SSA) at the disaggregated level. The underlying motivation is that, given their unique characteristics, permanent and temporary migrants are likely to respond differently to macroeconomic conditions in migrant-host countries and their native or migrant-home countries. For the empirical analysis, the system Generalized Method of Moments (GMM) approach was used to estimate a dynamic panel-data model involving 36 SSA countries over the period, 1980-2009. It was found that the inflows of compensation of employees and workers" remittances to SSA are influenced by host-country macroeconomic conditions in a similar way, whereas these two forms of remittances are driven by contrasting home-country macroeconomic conditions. Remittances from permanent migrants are less altruistic than remittances from temporary migrants. To attract higher remittances on a more permanent basis, the implementation of stable macroeconomic and pro-growth policies are inevitable in laborexporting SSA countries.JEL Classification: C23, E42, F22, F24, J33

Workers’ Remittances in Yemen: Macroeconomic Determinants and Impact on Economic Growth

“…The positive but insignificant effect of YD is in line with the results of Lianos (1997), and Agarwal and Horowitz (2002). The strong influence of YF refers to the critical role played by host countries income in explaining variations in workers' remittances in Yemen, which is consistent with the conclusions ofElbadawi and Rocha (1992), Silva andHuang (2006), Aydas et al (2005), Adenutsi (2014), McCracken et al (2017. The strongest influence on workers' remittances comes from MST at 1% significance level, which goes in line with the findings of Lianos (1997), Lueth and Ruiz-Arranz (2006), Freund and Spatafora (2008) Singh et al(2011), Bettin et al(2014), and Moussir and Tabit (2016.…”

“…A higher level of economic activity at the host country means a higher demand for migrant labor force and higher earnings and thus increasing remittances and vice-versa. This tendency confirmed by many studies such as those of Elbadawi and Rocha (1992), Aydas, Neyapti, and Metin-Ozcan ( 2005), Silva and Huang ( 2006), Adenutsi (2014), andMcCracken , Carlyn, andStack (2017).…”

“…According to the World bank estimates (2020b), workers' remittances reached US$ 463.6 billion in 2010 and increased to US$ 579.9 billion and US$ 613.5 billion in 2014 and 2017 respectively. This importance comes to be clearer if we refer to other forms of international financial flows such as official development assistance (ODA) which estimated to be US$ 128.6 billion, US$ 161.5 billion, and US$ 165 billion for 2010, 2014respectively (World bank, 2020a.…”

Follow the Money: Remittance Responses to FDI Inflows

“…Freund and Spatafora (2008) find that after controlling for transaction costs of sending remittances, remittances tend to increase with home country income, thus providing further evidence that remittances are procyclical in nature. Adenutsi (2014), using a sample of 36 Sub-Saharan African countries over 29 years, finds that rising income in the home country leads to an increase in remittances from permanent migrants, but decreases remittances from temporary migrants. These findings seem to indicate that permanent migrants remit for self-interested (investment) purposes, while temporary migrants tend to be more altruistic.…”

“…We then consider the role that FDI inflows may play in addition to these baseline determinants. The main set of determinants of remittance flows include the stock of migrants (Freund and Spatafora, 2008), host country income (Freund and Spatafora, 2008;Adenutsi, 2014), and exchange rates (Alleyne et al, 2008;Adenutsi, 2014). Others have also considered money supply (Vargas-Silva and Huang, 2006) and interest rate differentials (El-Sakka and McNabb, 1999;Aydas et al, 2005).…”