Remittances, labour productivity and inclusive growth in sub-Saharan Africa

Abstract

This paper analyzes the effects of remittances on productivity in Sub-Saharan Africa between 2000-2017. We estimate our models by the Quasi-Maximum Likelihood Fixed-Effect and the Panel Corrected Standard Errors method. We find that remittances affect positively both aggregate and sectoral productivity, but more prevalent on agricultural sector, where there is an urge proportion of poor people. They therefore contribute to generalized and inclusive growth. These results are consistent with previous studies except for the consideration of sectoral development. Moreover, these funds not only optimize the capital-labour mix but also intersectoral mobility of labour, underlining its positive impact simultaneously on all sectors of activity. Our results suggest that attracting remittances generates significant economic benefits. However, it would be more beneficial and responsible for governments to leverage on the positive impact profiles of these funds through the implementation of local policies and financing strategies to avoid dependence on emigration and foreign assistance.

Keywords: Remittances, Sectoral Development, Inclusive Growth, Sub-Saharan Africa, Labour Productivity