The Impact of Remittances on Human Development: A Quantitative Analysis and Policy Implications

Abstract

This paper contributes to the discussions on the nexus between migration and development by assessing the effects of remittances on human development. We do so first through a quantitative approach, and second, by elaborating the findings of our quantitative analysis within a broader theoretical and policy framework. By using OLS, we measure the impact of remittances on human development and compare it with the effect of foreign direct investment (FDI) and official development assistance (ODA). The findings indicate that remittances have a positive correlation with the human development level and are indeed an effective way to enhance human development in countries with medium income, especially in the medium run. We demonstrate that remittances show divergent developmental effects in countries with different government approaches to migration. In the second part of the paper, we discuss different hypotheses about the causes of the problems that our findings reveal and compare different actual policy solutions found in the developing world. We argue that remittances have the most positive effect in terms of boosting human development in the countries where the state perceives migration as an effective labour export strategy.

Phenomenon of Migration and Its Manifestations in the Modern World

“…Major changes have been directed at strengthening limitations: -demand for highly-qualified workers still exists but these countries select them more thoroughly; -countries look for investors and entrepreneurs, however they observe their activities more closely; -particular procedures of family immigration (family reunification) have been simplified, though the mainstream trend is still aimed at restriction; -new measures have been taken in respond to the humanitarian crisis in the Mediterranean region; -new measures have been introduced to enhance customs control, encourage voluntary return to native countries and to fight illegal employment of immigrants (Ustubici A., Irdam, 2012).…”

Untitled

“…Respectively, if the level of FDI increases by 1%, Turkey's GDP will grow by 0.0047%. At the same time, in contrast to trade, employment and foreign direct investment, inflation and remittances are negative factors which contribute to the decrease of Turkey's gross domestic product (Ustubici and Irdam, 2012). Thus, if the rate of inflation grows by 1%, Turkey's real GDP will fall by 0.0059%.…”

Remittances and Economic Development: Evidence From Sadc Countries

“…Remittances are crucial and commonly the main source of income for several families in low-income countries. Ustubici and Irdam (2012) concur and state that remittances are a critical means for survival of many households and some fragmented and war-torn states rely on remittances. It is for these reasons that remittances have been regarded as a development tool because they can increase household incomes and lessen poverty levels in developing countries.…”