Determinants of International Remittance Inflows in Middle-Income Countries in Asia and the Pacific

21 Pages Posted: 21 Feb 2020

See all articles by Naoyuki Yoshino

Naoyuki Yoshino

Asian Development Bank Institute

Farhad Taghizadeh-Hesary

Tokai University; Waseda University

Miyu Otsuka

Keio University

Date Written: June 7, 2019

Abstract

The middle-income trap is a serious problem in developing Asia and Pacific economies. Middle-income trap is the situation in which a country’s growth slows after reaching middle-income levels and the transition to high-income levels becomes unattainable. International remittances of immigrants to their country of origin is one of the most important elements contributing to the development of middle-income countries. By using a data set consisting of 12 Asia and Pacific middle-income countries — most of which are well-known migrant-sending countries — and by employing a panel data analysis technique, we tried to find the determinants of international remittance. Results show that per capita gross domestic product growth in origin countries and wage growth rate in destination countries are positively correlated with remittance inflows in middle-income countries, respectively. On the other hand, net foreign direct investment (FDI) inflows are negatively correlated with remittance inflows. This can be interpreted as the paradigm shift of acquiring foreign capital in middle-income countries from remittances in earlier stages of development to more FDI when the country prepares the requirements for absorbing the foreign capital with an economic growth. Moreover, real effective exchange rate, the level of education, trade openness, and political stability are positively associated with remittance inflows.

Keywords: remittance, middle-income trap, poverty, developing Asia and the Pacific

JEL Classification: I31, I32, I38

Suggested Citation

Yoshino, Naoyuki and Taghizadeh-Hesary, Farhad and Otsuka, Miyu, Determinants of International Remittance Inflows in Middle-Income Countries in Asia and the Pacific (June 7, 2019). ADBI Working Paper 964, Available at SSRN: https://ssrn.com/abstract=3541026 or http://dx.doi.org/10.2139/ssrn.3541026

Naoyuki Yoshino (Contact Author)

Asian Development Bank Institute ( email )

Kasumigaseki Building 8F
3-2-5, Kasumigaseki, Chiyoda-ku
Tokyo, 100-6008
Japan

Farhad Taghizadeh-Hesary

Tokai University ( email )

3-20-1 Orido
Shimizu-ku
Shizuoka, 424-8610
Japan

Waseda University ( email )

1-104 Totsukamachi, Shinjuku-ku
tokyo, 169-8050
Japan

Miyu Otsuka

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

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