Remittance-led growth hypothesis: A conceptual analysis

Abstract

This research centered on the conceptual and empirical analysis of the remittance-led growth hypothesis. There exist four views with regard to the relationship between remittances and economic growth and these include the remittances-led growth, growth-led remittances, feedback view and the neutrality view. Remittance-led growth mentions that remittances inspire economic growth whilst the growth-led remittances view says that economic growth attracts more remittances into the country. The feedback view suggests that both remittances and economic growth promotes each other whilst neutrality hypothesis stipulates that there exists no relationship at all between remittances and economic growth. Majority of literature concur that remittances plays a significant role in boosting economic growth especially in developing countries. It is against this backdrop that this study focuses on conceptually and empirically analyzing the remittance-led growth hypothesis. Trend analysis between remittances and economic growth for Botswana as a case study was done using time series annual data ranging from 1980 to 2011. The literature conceptual framework analysis shows beyond any reasonable doubt that indeed remittances are an integral element of economic growth especially for developing countries. The study therefore recommends nations especially developing countries to make available the necessary infrastructure that attracts personal remittance inflows from its citizens working in other countries in order to boost economic growth.