Remittances, labour productivity and inclusive growth in sub-Saharan Africa

Yao, Koffi Yves and Kouakou, Konan Auguste (2021): Remittances, labour productivity and inclusive growth in sub-Saharan Africa.

Abstract

This paper analyzes the effects of remittances on productivity in Sub-Saharan Africa between 2000-2017. We estimate our models by the Quasi-Maximum Likelihood Fixed-Effect and the Panel Corrected Standard Errors method. We find that remittances affect positively both aggregate and sectoral productivity, but more prevalent on agricultural sector, where there is an urge proportion of poor people. They therefore contribute to generalized and inclusive growth. These results are consistent with previous studies except for the consideration of sectoral development. Moreover, these funds not only optimize the capital-labour mix but also intersectoral mobility of labour, underlining its positive impact simultaneously on all sectors of activity. Our results suggest that attracting remittances generates significant economic benefits. However, it would be more beneficial and responsible for governments to leverage on the positive impact profiles of these funds through the implementation of local policies and financing strategies to avoid dependence on emigration and foreign assistance.

• Item Type: MPRA Paper
• Language: English
• Keywords: Remittances, Productivity, Sectoral Development, Inclusive Growth, Sub-Saharan Africa
• Subjects: F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; F - International Economics > F2 - International Factor Movements and International Business > F24 - Remittances; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development

References

Acharya, C. P., & Leon-Gonzalez, R. (2014). How do migration and remittances affect human capital investment? The effects of relaxing information and liquidity constraints. Journal of Development Studies, 50(3), 444–460. https://doi.org/10.1080/00220388.2013.866224

Acosta, P. A., Lartey, E. K. K., & Mandelman, F. S. (2009). Remittances and the Dutch disease. Journal of International Economics, 79(1), 102–116. https://doi.org/10.1016/j.jinteco.2009.06.007

Al Mamun, M., Sohag, K., Uddin, G. S., & Shahbaz, M. (2015). Remittance and domestic labor productivity: Evidence from remittance recipient countries. Economic Modelling, 47, 207–218. https://doi.org/10.1016/j.econmod.2015.02.024

Alcaraz, C., Chiquiar, D., & Salcedo, A. (2012). Remittances, schooling, and child labor in Mexico. Journal of Development Economics, 97(1), 156–165. https://doi.org/10.1016/j.jdeveco.2010.11.004

Arellano, M., & Bover, O. (1995). Another look at the instrumental variable estimation of error-components models. Journal of Econometrics, 68(1), 29–51. https://doi.org/10.1016/0304-4076(94)01642-D

Assemblée générale ONU. (2018). Conférence intergouvernementale chargée d’adopter le Pacte mondial pour des migrations sûres, ordonnées et régulières. Nations Unies A/CONF.231/3.

Bahadir, B., Chatterjee, S., & Lebesmuehlbacher, T. (2018). The macroeconomic consequences of remittances. Journal of International Economics, 111,214-232. https://doi.org/10.1016/j.jinteco.2018.01.010

Beck, N., & Katz, J. N. (1995). What to do (and not to do) with time-series cross-section data. American Political Science Review, 89(3), 634–647.

Blundell, R., & Bond, S. (1998). Initial conditions and moment restrictions in dynamic panel data models. Journal of Econometrics, 87(1), 115–143.

Chitambara, P. (2019). Remittances, institutions and growth in Africa. International Migration, 57(5), 56–70. https://doi.org/10.1111/imig.12542

Combes, J.-L., & Ebeke, C. H. (2011). Remittances and household consumption instability in developing countries. World Development, 39(7), 1076–1089. https://doi.org/10.1016/j.worlddev.2010.10.006

Combes, J.-L., Ebeke, C. H., Maurel, M., & Yogo, T. U. (2014). Remittances and working poverty. The Journal of Development Studies, 50(10), 1348–1361. https://doi.org/10.1080/00220388.2014.940912

De Vasconcelos, P., Ponsot, F., Terry, D. F., & Vásquez, B. (2017). Travailleurs migrants et envois de fonds: vers la réalisation des objectifs de développement durable, une famille à la fois. Fonds international de développement agricole (FIDA) : Investir dans les populations rurales.

Dorinet, E., Jouvet, P.-A., & Wolfersberger, J. (2020). Is the agricultural sector cursed too? Evidence from Sub-Saharan Africa. World Development, 105250. https://doi.org/10.1016/j.worlddev.2020.105250

Gallén, M. L., & Peraita, C. (2018). The effects of national culture on corporate social responsibility disclosure: a cross-country comparison. Applied Economics, 50(27), 2967–2979. https://doi.org/10.1080/00036846.2017.1412082

Harris, J. R., & Todaro, M. P. (1970). Migration, unemployment and development: a two-sector analysis. The American Economic Review, 126–142.

Hayakawa, K., & Pesaran, M. H. (2015). Robust standard errors in transformed likelihood estimation of dynamic panel data models with cross-sectional heteroskedasticity. Journal of Econometrics, 188(1), 111–134. https://doi.org/10.1016/j.jeconom.2015.03.042

Hsiao, C. (2014). Analysis of panel data. No. 54. Cambridge university press.

Hsiao, C., Pesaran, M. H., & Tahmiscioglu, A. K. (2002). Maximum likelihood estimation of fixed effects dynamic panel data models covering short time periods. Journal of Econometrics, 109(1), 107–150. https://doi.org/10.1016/S0304-4076(01)00143-9

Hussein, K. A., Mukungu, A., & Awel, Y. M. (2018). Les moteurs de la croissance inclusive en Afrique. Commission Economique Pour l’Afrique (CEA).

Ivanic, M., & Martin, W. (2018). Sectoral productivity growth and poverty reduction: National and global impacts. World Development, 109, 429–439. https://doi.org/10.1016/j.worlddev.2017.07.004

Kapri, K., & Ghimire, S. (2020). Migration, remittance, and agricultural productivity: Evidence from the Nepal Living Standard Survey. World Development Perspectives, 100198. https://doi.org/10.1016/j.wdp.2020.100198

Kripfganz, S. (2016). Quasi–maximum likelihood estimation of linear dynamic short-T panel-data models. The Stata Journal, 16(4), 1013–1038. https://doi.org/10.1177/1536867X1601600411

Lucas, R. E. B., & Stark, O. (1985). Motivations to remit: Evidence from Botswana. Journal of political Economy. Journal of Political Economy, 93(5), 901–918.

Moundigbaye, M., Rea, W. S., & Reed, W. R. (2018). Which panel data estimator should I use? : A corrigendum and extension. Economics: The Open-Access, Open-Assessment E-Journal, 12(4), 1–31.

Nguimkeu, P. (2014). A structural econometric analysis of the informal sector heterogeneity. Journal of Development Economics, 107, 175–191. https://doi.org/10.1016/j.jdeveco.2013.12.001

Nguimkeu, P. (2016). Credit Constraints and Delayed Micro-Entrepreneurship. Working Papers.

Nickell, S. (1981). Biases in dynamic models with fixed effects. Econometrica: Journal of the Econometric Society, 1417–1426.

Nwokoye, E. S., Igbanugo, C. I., & Dimnwobi, S. K. (2020). International migrant remittances and labour force participation in Nigeria. African Development Review, 32(2), 125–137. https://doi.org/10.1111/1467-8268.12421

Olubiyi, E. A. (2014). Trade, remittances and economic growth in Nigeria: any causal relationship? African Development Review, 26(2), 274–285. https://doi.org/10.1111/1467-8268.12081

Parks, R. W. (1967). Efficient estimation of a system of regression equations when disturbances are both serially and contemporaneously correlated. Journal of the American Statistical Association, 62(318), 500–509.

Poirine, B. (1997). A theory of remittances as an implicit family loan arrangement. World Development, 25(4), 589–611.

Rapoport, H., & Docquier, F. (2006). The economics of migrants’ remittances. Handbook of the Economics of Giving, Altruism and Reciprocity, 2, 1135–1198. https://doi.org/10.1016/S1574-0714(06)02017-3

Reed, W. R., & Ye, H. (2011). Which panel data estimator should I use? Applied Economics, 43(8), 985–1000. https://doi.org/10.1080/00036840802600087

Romer, D. (2012). Advanced macroeconomics Fourth Edition. McGraw-Hill.

Roodman, D. (2009a). How to do xtabond2: An introduction to difference and system GMM in Stata. The Stata Journal, 9(1), 86–136. https://doi.org/10.1177/1536867X0900900106

Roodman, D. (2009b). Practitioners’ corner: A note on the theme of too many instruments. Oxford Bulletin of Economics and Statistics, 71(1), 135–158. https://doi.org/10.1111/j.1468-0084.2008.00542.x

Rozelle, S., Taylor, J. E., & DeBrauw, A. (1999). Migration, envois de fonds et productivité agricole en Chine. American Economic Review, 89(2), 287–291.

Shapiro, A. F., & Mandelman, F. S. (2016). Remittances, Entrepreneurship, and Employment Dynamics over theBusiness Cycle. Journal of International Economics, 103, 184–199. https://doi.org/10.1016/j.jinteco.2016.10.001

Sobiech, I. (2019). Remittances, finance and growth: does financial development foster the impact of remittances on economic growth? World Development, 44-59,113. https://doi.org/10.1016/j.worlddev.2018.08.016

Stark, O., & Bloom, D. E. (1985). The New Economics of Labor Migration. The American Economic Review.

Stark, O., & Levhari, D. (1982). On migration and risk in LDCs. Economic Development and Cultural Change, 31(1), 191–196.

Su, C.-W., Sun, T., Ahmad, S., & Mirza, N. (2021). Does institutional quality and remittances inflow crowd-in private investment to avoid Dutch Disease? A case for emerging seven (E7) economies. Resources Policy, 72, 102111. https://doi.org/10.1016/j.resourpol.2021.102111

Van Gent, S. (2017). Beyond buzzwords: What is «inclusive development». Synthesis Report, INCLUDE Secretariat. Hague, Netherlands.

Williams, K. (2017). Do remittances improve political institutions? Evidence from Sub-Saharan Africa. Economic Modelling, 61, 65–75. https://doi.org/10.1016/j.econmod.2016.12.004

Woodruff, C., & Zenteno, R. (2007). Migration networks and microenterprises in Mexico. Journal of Development Economics, 82(2), 509–528. https://doi.org/10.1016/j.jdeveco.2006.03.006

Wooldridge, J. M. (2016). Introductory Econometrics a modern approach sixth edition. Cengage Learning.

World Bank, & KNOMAD. (2019). Migration and remittances : recent developments and outlook. Migration and development brief 31.

Zhang, C., & Zhao, W. (2014). Panel estimation for income inequality and CO2 emissions: A regional analysis in China. Applied Energy, 136, 382–392. https://doi.org/10.1016/j.apenergy.2014.09.048