Istituto di Economia Internazionale - Remittances and Foreign Aids: Substitutes or Complements in the Economic Growth of Developing Countries?

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Corresponding Author:
Temitope Laniran, Bradford Centre for International Development, University of Bradford, United Kingdom and Centre for Petroleum, Energy Economics and Law, University of Ibadan, Nigeria

Coauthors:
Victoria A. Olakunle, School of Economics, The University of Nottingham, UK

Remittances and Foreign Aids: Substitutes or Complements in the Economic Growth of Developing Countries?

Volume 72 - Issue 1, February 2019
(pp. 23-46)
JEL classification: F24, F35, O41
Keywords: Foreign Aid, Remittances, Economic Growth

Abstract

Existing literature posits that there is an association between foreign aid and growth; however, the robustness of this relationship is often questioned. A similar lack of consensus exists on the relationship between remittances and growth. Given the significant outlays of foreign aid and remittances to developing countries, this study is motivated by the objective of investigating which of these transfers has the greater impact on growth. Employing panel data of 77 developing countries over the 1995-2011 periods using Systems GMM, the results suggest a substitutable relationship and not complementary between aid and remittances implying that the presence of remittance reduces the amount of aid allocated to a country and also its relative growth-impact.

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Remittances and Foreign Aids: Substitutes or Complements in the Economic Growth of Developing Countries?

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Institute for International Economics of the Genoa Chamber of Commerce

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of the Genoa Chamber of Commerce