The Impact of Remittance Inflows on Economic Complexity: A Quantile CS-ARDL Analysis for LAC Countries

Olcay Çolak and Sevilay Ece Gümüş Özuyar
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Olcay Çolak: Uşak University
Sevilay Ece Gümüş Özuyar: Necmettin Erbakan University

Business and Economics Research Journal, 2026, vol. 17, issue 4, 523-544

Abstract: This study investigates the impact of remittance inflows on economic complexity across 11 Latin American and Caribbean (LAC) countries from 1996 to 2023. While remittances are a major source of external financing, this research examines whether they trigger the 'Dutch Disease' or facilitate structural transformation. Utilizing panel quantile methodologies to account for cross-sectional dependence and structural heterogeneity, the findings reveal quantile-dependent relationship. Utilizing panel quantile methodologies to account for cross-sectional dependence and structural heterogeneity, the findings reveal a statistically constrained and localized relationship. In the lower and median quantiles, remittance inflows do not exert a statistically significant long-run effect on economic complexity. However, at higher quantiles of economic complexity, remittances demonstrate a statistically significant positive long-run impact under specific model specifications. This implies that remittances do not function as a generalized driver of structural transformation, but rather play a highly conditional role that supports economic sophistication only in economies that already possess relatively advanced structural capabilities and absorptive capacity. The study’s originality lies in its identification of a distributional heterogeneity, suggesting that the transformative power of remittances is contingent upon a nation's absorptive capacity. Policy recommendations focus on channeling these flows into productive investments to support industrial capabilities.

Keywords: Remittances; Economic Complexity; Latin American and the Caribbean Countries; Panel Quantile CS-ARDL; Dutch Disease (search for similar items in EconPapers)
JEL-codes: C23 F21 O14 O15 O33 (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:ris:buecrj:023909

DOI: 10.20409/berj.2026.510

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