The impact of remittances on Zimbabwean economic development
Abstract
Remittances have grown to rival or surpass official development assistance and have
increased living standards in the migrant sending countries. This research analysis explores
the empirical developmental impact of formal remittances in Zimbabwe, particularly their
effect on poverty reduction and human capital. Using a three stage least squares estimation
technique to counter the endogeneity problem of remittances, the study provides evidence
that a unit increase in the share of remittances on GDP reduces poverty by 52% and increases
human capital accumulation by 11.5% in Zimbabwe. The reverse causality of remittances and
poverty reduction has not been supported by the results of this study. Thus remittances
contribute significantly to development objectives such as those of the Millennium
Development Goals. The paper also strives to show that trade openness, GDP and
dependency ratio help increase remittance inflows. Consequently, the development potential
of remittances can particularly be improved by increasing the total flow of formal remittances
and bilateral and multilateral agreements between the sending and the receiving countries.
Improved management of remittances and incentives to channel remittances into more
productive uses can also improve the developmental effect(s) of remittances
Sponsor
The African Economic Research Consortium (AERC)Subject
remittancesinternational remittances
international migration
economic development.
migrant transfers