Remittances and Economic Development: Evidence From Sadc Countries

Abstract

This study sought to examine the effects of remittances on economic development on selected SADC states. Remittances are important for the survival of poor individuals, households and societies around the world. The funds sent by migrants are a crucial means of survival that can assist families in buying food, sending children to school and building basic shelter. Given the poor economic development in these SADC countries and the probable development outcomes of remittances, remittances income should be critical to the SADC countries. However, literature shows that relationship between remittances and development is not always clear. Remittances may bring positive or negative effects. It is against this background that this study sought to examine the effects of remittances on economic development on selected SADC states. The study used panel data and the sample included five SADC countries (Zimbabwe, Mozambique, Lesotho, Eswatini and DRC) for the years 2005-2015. The study used a Fixed effects model, random effects model and a GMM approach to estimate the effects of remittances and economic development. Results showed that remittances have a positive effect with economic development. This finding suggests that remittance inflows are able to stimulate economic development. The study recommended that the government put in place policies that enhance the remittances transformation to economic development.

Effects of Trade Openness and International Financial Inflows on Africa's Productive Capacity: A Study of the Moderating Role of Governance Institutions

“…This fi nding is consistent with some studies in the literature that have also established that international fi nancial infl ows such as FDI infl ow, remittances and foreign aid enhance overall economic growth in the recipient countries (Zamani and Tayebi, 2022;Wei et al, 2022;Girma and Tilahun, 2022;Azam and Feng, 2022;Adeseye, 2021;Adjei et al, 2020). The fi nding is also consistent with the strand of empirical literature that indicates that international fi nancial infl ows such as FDI infl ow, remittances and foreign aid are positive drivers of economic sophistication (Yimer, 2022;Nguea et al, 2022;Mlambo and Kapingura, 2020;Saadi, 2020). Our fi nding is also consistent with economic expectations because, economically, international fi nancial infl ows such as FDI infl ows, remittances and foreign aid are expected to bring about various economic benefi ts such as technological transfer, human capital enhancement, increased productivity and capital investment, thereby enhancing the capacity of the domestic economy to achieve higher productivity, more product diversity and better competitiveness.…”

“…An emerging body of literature has now acknowledged the importance of remittances in stimulating productive capacities for the benefi t of overall economic sophistication, growth and development. In a panel study of fi ve SADC economies (Zimbabwe, Mozambique, Lesotho, Eswatini and DR Congo), Mlambo and Kapingura (2020) used fi xed eff ects, random eff ects and GMM models to establish that remittances have a positive eff ect on economic sophistication, which is good for stimulating productive capacities and growth. Saadi (2020) also found that remittances used for investment purposes are positively associated with export complexity, while a panel data study of 15 Asian countries by Liu et al (2022), using quantile regression and augmented mean group methods, also found a positive relationship between remittances and economic complexity.…”