Remittances and Investment

Per-Olof Bjuggren (), James Dzansi () and Ghazi Shukur
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James Dzansi: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden

No 216, Working Paper Series in Economics and Institutions of Innovation from Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: This paper studies the impact of remittances on investment. Workers’ remittances to developing countries have grown to be an important source of financing, amounting to around $300 billion a year. The funds are used for both consumption and investment in the home countries of the migrants. The importance of financial and institutional framework in the receiving countries and how they interact with remittances is stressed. Data on remittance flow to 79 developing countries during 1995-2005 is used. Dynamic panel data approach is applied for this purpose. The results reveal that remittances, high quality institutional framework and well developed credit market increase investment. However, it is also found that the marginal importance of remittances as a financial source for investment decreases with improved institutional framework and a more developed credit market.

Keywords: Remittances; Investment; Institutions; Financial Development; Dynamic Panel Data (search for similar items in EconPapers)
JEL-codes: C23 E22 F24 G21 I38 O16 O17 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2010-02-11
New Economics Papers: this item is included in nep-dev and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:hhs:cesisp:0216

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