The Role of Remittances as More Efficient Tool of Development Aid in Developing Countries

Robert Stojanov and Wadim Strielkowski

Prague Economic Papers, 2013, vol. 2013, issue 4, 487-503

Abstract: This paper examines the effectiveness of remittances and official development assistance (ODA) in developing countries. It compares the outcomes of aid poured into the economies of the Third World for decades without any visible effect and remittances transferred by emigrants to their countries of origin which proved to be quite effective. We find that remittances have a stronger net positive effect on the increase of GDP per capita in developing economies than development aid. In addition, remittances tend to be higher than ODA funds, they are absorbed by 80-90 per cent (in comparison with 50 per cent of aid budgets spent on administrative and other costs) and do not hinge on institutional quality. The paper advocates the importance of remittances over ODA and supports the wide usage of coherent development policies executed by the developed Western economies with an aim to enhance transparent and efficient remittance transfers as one of the best methods to promote development in less-developed countries (e.g. economies in Africa, Asia or Latin America).

Keywords: developing countries; international migration; official development aid; remittances (search for similar items in EconPapers)
JEL-codes: F22 F24 J61 O55 P45 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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DOI: 10.18267/j.pep.464

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