REMITTANCES AND ECONOMIC DEVELOPMENT: EVIDENCE FROM SADC COUNTRIES

Abstract

This study sought to examine the effects of remittances on economic development on selected SADC states. Remittances are important for the survival of poor individuals, households and societies around the world. The funds sent by migrants are a crucial means of survival that can assist families in buying food, sending children to school and building basic shelter. Given the poor economic development in these SADC countries and the probable development outcomes of remittances, remittances income should be critical to the SADC countries. However, literature shows that relationship between remittances and development is not always clear. Remittances may bring positive or negative effects. It is against this background that this study sought to examine the effects of remittances on economic development on selected SADC states. The study used panel data and the sample included five SADC countries (Zimbabwe, Mozambique, Lesotho, Eswatini and DRC) for the years 2005-2015. The study used a Fixed effects model, random effects model and a GMM approach to estimate the effects of remittances and economic development. Results showed that remittances have a positive effect with economic development. This finding suggests that remittance inflows are able to stimulate economic development. The study recommended that the government put in place policies that enhance the remittances transformation to economic development.