Are remittances and foreign aid interlinked? Evidence from least developed and developing countries
Syed Ali Abbas,
Saroja Selvanathan and
Jayatilleke S. Bandaralage
Economic Modelling, 2021, vol. 94, issue C, 265-275
Foreign aid and migrant remittances are major sources of external finance for developing countries, but there is little research into whether they are interlinked. In the existing literature, only a few studies have examined the nexus between these two financial flows and their conclusions have been mixed. This study, using recent data (1980–2016) from 50 aid-recipient countries, empirically analyses the relationship between foreign aid and remittances. Applying dynamic panel estimation techniques, we find a negative relationship between foreign aid and remittances. Further investigation of the transmission channels reveals that foreign aid, by broadening human capital through its robust effects on education, increases remittance flows. The human capital led growth channel is found to be effective in all countries (and sub-groups), while the migration channel of aid significantly favours remittances only in the LDCs. Though aid substitutes remittances generally, it also increases remittances indirectly through different transmission channels.
Keywords: Foreign aid; Remittances; Economic growth; Education; Panel estimation (search for similar items in EconPapers)
JEL-codes: F24 F35 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4) Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:94:y:2021:i:c:p:265-275
Access Statistics for this article
Economic Modelling is currently edited by S. Hall and P. Pauly
More articles in Economic Modelling from Elsevier
Bibliographic data for series maintained by Catherine Liu ().