The Effect of Inward and Outward Remittances on Welfare in Africa

The Effect of Inward and Outward Remittances on Welfare in Africa

Author by Dr. Rowland Obiakor

Journal/Publisher: Acta Universitatis Danubius. Œconomica - Danubius Journals

Volume/Edition: 17

Language: English

Pages: 84 - 103


We estimated the effect of inward and outward remittances on welfare using data on 17 SSA
countries from 2005 to 2019, with welfare proxied as consumption. Previous studies on remittances
had tended to be focused more on the effect of inward remittances on macroeconomic variables, while
few that considered inward and outward remittances were single-country analysis. The study applied
the system-GMM estimation approach to accommodate the dynamic nature of the empirical model.
Results showed that inward remittances exerted a positive and significant effect on consumption, while
the effect of outward remittances was negative and also significant. However, the coefficient of inward
remittances, in absolute terms was found to be larger than the coefficient of outward remittances. The
instruments used in the estimation was found to be valid by the Sargan and Hansen tests while the
absence of serial correlation was confirmed by the Arrellano-Bond tests. Policy around remittances,
given the greater weight of inward remittances on consumption should be such that will make remitting

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