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Do Remittances Attract Foreign Direct Investment? An Empirical Investigation

Basnet Hem C. () and Kamal Upadhyaya ()
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Basnet Hem C.: Chadron State College, Chadron, NE 69337, USA

Global Economy Journal, 2014, vol. 14, issue 1, 9

Abstract: Remittances are a major source of household income in many Asian, African, and Latin American countries. Households spend a significant portion of remittances on health and education. Given that human capital is one of the primary determinants of foreign direct investment (FDI) inflow, this study develops a model in which remittances are one of several determinants of the observed variation in FDI. The model is estimated using data from a group of 35 middle-income countries from Latin America, Asia–Pacific, and Africa. The estimated results ascribe no significance to remittances in explaining cross-country variation in FDI. However, geographically-disaggregated estimated results do establish a positive effect for African countries, no significant effect for Latin American countries, and a negative effect for the Asia–Pacific region.

Date: 2014
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Handle: RePEc:bpj:glecon:v:14:y:2014:i:1:p:9:n:5