Remittance inflow and economic development: interaction with financial inclusion and human capital

ABSTRACT

This paper used the dynamic panel data technique to examine the combined indirect effect of remittance inflows via human capital and financial inclusion on economic growth in developing and developed countries over the period between 2007 and2 018. The results from the endogeneity-robust System Generalized Method of Moments (GMM) analysis revealed that with with financial inclusion and human capital, are engines of economic growth in remittance-receiving developing countries. Specifically, better financial inclusion absorbs and efficiently channel remittance inflows into proper and productive economic activities, while developed human capital directly encourages robust economic activities. Therefore, this paper provides insights into the mechanisms that boost remittances’ effect on economic growth, i.e. financial inclusion and human capital. Accordingly, we recommend that regulatory frameworks aiming to encourage inward remittances should consider developing financial inclusion and human capital to leverage remittance funds for developmental agendas.

Key words:

• Remittances
• financial inclusion
• human capital
• economic development

Acknowledgment

We benefited from the comments and suggestions Prof.Law Siong Hook. We are also grateful to Prof. Farhad Taghizadeh-Hesary with his reviews and comments at the 9th International Conference on Asian Economic Development (AED2020) on Poverty Reduction for Inclusive Sustainable Growth in Developing Asia. The remaining errors are ours.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Notes on contributors

Hayot Berk Saydaliyev

Hayot Berk Saydaliyev, PhD in Financial Economics (Universiti Putra Malaysia, Malaysia) currently a coordinator of research in SDU Business School. He received his Master’s Degree in Financial Economics at University Putra Malaysia, Kuala Lumpur (Malaysia) and obtained a Bachelor's degree in International Economic Relations in State University of Uzbekistan, Tashkent (Uzbekistan) and second Bachelor’s in Emirates Hospitality Management Academia in Dubai (UAE). Saydaliev is interested in Financial Economics, Health Economics, Monetary and Fiscal Policy, Migration and Development. Dr. Saydaliev has published in SSI journals like Economic Research-Ekonomska Istraživanja (Q2), Global Economy Journal (Q3), and several others.

Lee Chin

Lee Chin is an associate professor in international economics at School of Business and Economics, Universiti Putra Malaysia. Her teaching and research interests are in the areas of financial economics, international economics, energy economics and developmental economics. She has taught more than 20 different courses at both the undergraduate and postgraduate levels, and supervised more than 100 undergraduate and postgraduate students. To date, she has published 90 journal articles, 4 books and 15 chapters in books.

Azali Mohamed

Prof. Dr. Azali Mohamed is a well trained Cardiff Business School graduate with vast experience and excellent knowledge in many areas of applied macroeconomics. Within 21 years of service in Universiti Putra Malaysia (UPM), hehas successfully supervised 59 post-graduates and published more than one hundred publications. His journal article published in Japan and the World Economy has been cited as a Top 10 Requested Papers in the year 2001. In 2012, his publications were cited as Top 10 Most Productive Malaysian-Based Authors in Arts, Humanities and Social Sciences for Publications Indexed, by the Malaysian Citation Centre, Ministry of Higher Education Malaysia (KPT). Also, he has been recognized by KPT as UPM’s Top 5 Non-Science Highly Published Researchers. Prof. Dr. Azali’s active involvement and interest in student affairs is duly acknowledged with his appointment as the Deputy Vice-Chancellor of Student Affairs and Alumni UPM from the 16th May 2004 to 15th May 2010, and as CEO cum Vice Chancellor of Kolej Universiti Poly-Tech MARA from 1st October 2013 to 31st October 2015. Since 1st October 2018, he is assigned as a Dean at Faculty of Economics and Management, Universiti Putra Malaysia.