What drives international remittances to Africa

John Bosco Nnyanzi

African Journal of Economic and Management Studies, 2016, vol. 7, issue 3, 397-418

Abstract: Purpose - The purpose of this paper is to investigate the macro-economic and institutional drivers of remittance inflows to Africa. Design/methodology/approach - The paper uses an enhanced gravity model in a random effects framework to test two hypotheses dominant in literature as well as the institutional quality hypothesis. A bilateral data set is created from the most recent available remittance data set to afford the capture of the impact of the selected macro-economic variables from both the host and recipient countries. Findings - The results provide support for the trio hypotheses. A key finding is the co-existence of altruism and self-interest motives. Also, control of corruption, financial development and a reduction in unofficial economic activity are observed to facilitate remittance inflows. The authors confirm the resilience of remittances during the global crisis and document a positive significant relationship between remittance inflows on the one hand and host migration stock, age dependency, etc., on the other. Practical implications - This paper generates various insights in the design of relevant macro-economic and institutional policies to enhance remittance inflows and the productive use of the same for purposes of economic growth and development via poverty reduction and secure resource flow. Originality/value - The majority of previous studies on the determinants of remittance inflows have basically focussed on the microeconomic variables, an approach that could understate the macro-economic impact of remittances and lead to inadequate policy formulation. The use of an enhanced gravity model on a newly created bilateral data set in the analysis is a nuance in the economics of remittances. Besides, previous studies have often ignored the institutional environment as critical in the remittance-determinant model.

Keywords: Institutions; Altruism; Self-interest; Remittances; Gravity model (search for similar items in EconPapers)
Date: 2016
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ajemsp:v:7:y:2016:i:3:p:397-418

DOI: 10.1108/AJEMS-07-2013-0067

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