Does the size of the informal economy impede the impact of remittances on economic growth? Evidence from Sub-Saharan African countries

Njangang, Henri (2018): Does the size of the informal economy impede the impact of remittances on economic growth? Evidence from Sub-Saharan African countries.

Abstract

The purpose of this paper is to investigate the relationship between remittances and economic growth. Additionally, it examines whether the size of the informal economy alter negatively the effect of remittances on economic growth, which surprisingly has received less attention in the literature. The paper applied the Ordinary Least Squared (OLS) and system Generalized Method of Moment (GMM) by Arellano and Bond (1991) and Arellano and Bover (1995). The sample include 30 Sub-Saharan African (SSA) countries over 1991-2015. The results show that: first, remittances have a positive and significant effect on economic growth. Second, the impact of remittances on economic growth decreases with the size of the informal economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Remittances, the informal economy, economic growth, SSA
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E26 - Informal Economy ; Underground Economy; F - International Economics > F2 - International Factor Movements and International Business > F22 - International Migration; F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F43 - Economic Growth of Open Economies; O - Economic Development, Innovation, Technological Change, and Growth > O5 - Economywide Country Studies > O55 - Africa

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