Remittances and economic growth in developing countries

This paper examines the effect of workers' remittances on economic growth in a sample of 39 developing countries using panel data from 1980–2004 resulting in 195 observations. A standard growth model is estimated using both fixed-effects and random-effects approaches. The empirical results show a significant overall fit based on the fixed-effects method as the random-effects model is rejected in statistical tests. Remittances have a positive impact on growth. Since official estimates of remittances used in our analysis tend to understate actual numbers considerably, more accurate data on remittances is likely to reveal an even more pronounced effect of remittances on growth.