Brain Gains: A Cross-Country Study on the Relationship Between Remittances and Entrepreneurship

Abstract

This paper asks: do remittances promote entrepreneurship? Remittances have become one of the largest forms of cross-country financial inflows, even exceeding other prominent forms of financial flows, including foreign aid and foreign direct investment (Meyer & Shera, 2017). By directly providing relief, remittances are an important income and capital source for family members of immigrant workers in home countries. We hypothesise and empirically document a positive link between remittances and entrepreneurship rates across countries. Our results suggest that remittances promote early-stage business development, particularly for opportunity-seeking entrepreneurs. In addition, we find that female opportunity driven entrepreneurs and entrepreneurs with a secondary education and from a middle-class background benefit more from remittances.

Keywords: Remittances, Entrepreneurship, Development, Immigration, Financial Inflows, Brain Drain, Brain Gain, Early-Stage Entrepreneurship, Opportunity-Driven Entrepreneurship, Diaspora Investment

JEL Classification: F24, L26, O1