Abstract
M.Comm.
The subject of the growth effects of remittances is characterised by different and conflicting
perspectives. While migration optimists believe in positive growth effects of remittances,
migration pessimists, on the other hand, challenge this position and claim that remittances
have either a negative or statistically insignificant effect on economic growth. Those for
remittances argue that remittances have a positive effect on economic growth mainly through
subsequent increases in investment capital and human capital. Migration pessimists, however,
stress that remittances negatively impact economic growth, mainly, because of inflationary
pressures and moral hazards that result in reduced labour supply. Given such contrasting
literature, this study makes an attempt to contribute to the existing literature by assessing the
growth-effects of remittances in twenty-nine Sub-Saharan Africa countries over the period
1980-2008. The Arellano-Bover/Blundell-Bond GMM one-step estimator is used in the
assessment. Empirical results from the study reveal evidence supporting for statistically
significant positive growth effects of remittances in Sub-Saharan Africa. The study further
reveals that these positive growth effects of remittances in Sub-Saharan Africa happen
through the human capital channel. Even when heterogeneity of sub-regions is taken into
account, there is still evidence showing positive growth effects of remittances in Sub-Saharan
Africa. Results, however, reveal that in West Africa, remittances have a low positive effect
on economic growth.