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Do Remittances Promote Economic Growth and Reduce Poverty? Evidence from Latin American Countries

Author

Listed:
  • E. M. Ekanayake

    (College of Business and Entrepreneurship, Bethune-Cookman University, Daytona Beach, FL 32114, USA)

  • Carlos Moslares

    (IQS School of Management, Universitat Ramon Llull, Via Augusta, 390, 08017 Barcelona, Spain)

Abstract
In this study, we explore the hypotheses that (a) workers’ remittances enhance economic growth in Latin American countries, and (b) workers’ remittances help reduce poverty in Latin American countries. In recent decades, workers’ remittances have become an important source of income for many developing countries and, as a global aggregate, workers’ remittances are the largest source of foreign financing after foreign direct investment. This paper analyzes the effects of workers’ remittances on economic growth and poverty in 21 Latin American countries. The study uses annual data covering all Latin American countries for the period 1980–2018. We employ panel least squares and panel fully-modified least squares (FMOLS) methods. In addition, we estimate the short-run and long-run effects of workers’ remittances on economic growth and poverty on individual countries with the Autoregressive Distributed Lag (ARDL-ECM) approach to co-integration analysis. The results reveal that workers’ remittances have a positive effect on long-run economic growth in the majority of the countries studied, but have mixed effects in the short-run. They also suggest that workers’ remittances tend to lower poverty rates in Latin America.

Suggested Citation

  • E. M. Ekanayake & Carlos Moslares, 2020. "Do Remittances Promote Economic Growth and Reduce Poverty? Evidence from Latin American Countries," Economies, MDPI, vol. 8(2), pages 1-26, May.
    • Handle: RePEc:gam:jecomi:v:8:y:2020:i:2:p:35-:d:352759
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    References listed on IDEAS

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    3. Zubin Deyal, 2024. "Weathering the storm: investigating the role of remittances as immediate disaster relief in developing countries," CSAE Working Paper Series 2024-01, Centre for the Study of African Economies, University of Oxford.
    4. Georgeta Soava & Anca Mehedintu & Mihaela Sterpu & Mircea Raduteanu, 2020. "Impact of Employed Labor Force, Investment, and Remittances on Economic Growth in EU Countries," Sustainability, MDPI, vol. 12(23), pages 1-31, December.
    5. Ololade Periola & Monsurat Foluke Salami, 2024. "Remittance outflow, financial development and macroeconomic indicators: evidence from the UK," Future Business Journal, Springer, vol. 10(1), pages 1-12, December.
    6. Abdullah Mohammed Al-Malki & Mehboob-Ul Hassan & Jabbar Ul-Haq, 2023. "Nexus between remittance outflows and economic growth in GCC countries: the mediating role of financial development," Applied Economics, Taylor & Francis Journals, vol. 55(46), pages 5451-5463, October.
    7. Ifeanyi J. Ozulumba, PhD Candidate & Amaka G. Metu & Geraldine Nzeribe, 2024. "An Evaluation of the Impact of Migration on Human Capital Development: Evidence from the ECOWAS," International Journal of Research and Innovation in Social Science, International Journal of Research and Innovation in Social Science (IJRISS), vol. 8(7), pages 1086-1095, July.
    8. Md. Saiful Islam, 2022. "Do personal remittances influence economic growth in South Asia? A panel analysis," Review of Development Economics, Wiley Blackwell, vol. 26(1), pages 242-258, February.
    9. Miao Miao & Jiang Yushi & Dinkneh Gebre Borojo, 2020. "The Impacts of China–Africa Economic Relation on Factor Productivity of African Countries," Economies, MDPI, vol. 8(2), pages 1-30, June.
    10. Imen Mohamed Sghaier, 2021. "Remittances and Economic Growth in MENA Countries: The Role of Financial Development," Economic Alternatives, University of National and World Economy, Sofia, Bulgaria, issue 1, pages 43-59, March.
    11. Wen Wu & Leow Hon-Wei & Siyao Yang & Iskandar Muda & Zhaoyi Xu, 2023. "Nexus between financial inclusion, workers’ remittances, and unemployment rate in Asian economies," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-10, December.
    12. Natalia I. Doré & Aurora A. C. Teixeira, 2023. "Empirical Literature on Economic Growth, 1991–2020: Uncovering Extant Gaps and Avenues for Future Research," Global Journal of Emerging Market Economies, Emerging Markets Forum, vol. 15(1), pages 7-37, January.

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