WORKERS’ REMITTANCES, INSTITUTIONAL QUALITY AND ECONOMIC GROWTH IN SUB-SAHARAN AFRICA
WORKERS’ REMITTANCES, INSTITUTIONAL QUALITY AND ECONOMIC GROWTH IN SUB-SAHARAN AFRICA

Summary/Abstract: This study examines the role of institutional quality (financial and non-financial) on the impact of workers’ remittances on growth in SSA. The study also tests hierarchy of institutions hypothesis based on the arguments that different institutions exert different impact on growth. Based on macro-economic impact of remittances on economic growth in 33 SSA countries from 1996 to 2018, this study employs panel data regression analysis based on system GMM. The study finds that remittances have negative impact on growth. The study finds positive effect on financial development with strong evidence of a positive interaction between remittances and financial depth. Non-financial institutional factor as a whole has positive and significant impact on growth. Economic-institutions channel to growth is positive and significant but political-institution channel is only positive. The study, therefore, concludes that financial and non-financial institutions matter and matter a lot for remittance to impact on growth. Remittances can only have positive impact on economic growth in an environment with sound financial and non- financial institutional framework. Again, economic institutional channel is proximately related to growth, political institutional channel is deeply related, hence supports hierarchy of institution hypothesis.

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