Migrant remittances and economic performance: A global assessment of the impact of remittances on recipient countries

This thesis aims to close a major research gap in IB scholarship, which is the lack of consideration of an important international capital flow, namely remittance transfers from migrant workers to their countries of origin, as an alternative and potential complement to the analysis of Foreign Direct Investment (FDI) and hence, in
obtaining a better appreciation of globalisation. In so doing, we cross-fertilise the fields of IB and development economics, hence answering to calls by IB scholars for
IB to address issues of comparative political economy. While development economists have considered migrant remittances, the last mentioned have been ignored in IB literature. On the other hand, development economists have failed to consider remittances alongside FDI, the relationship between the two, and their combined impact on economic performance. Existing analyses of the determinants
of remittances and their effects on economic performance moreover, have downplayed the channels through which remittances impact on performance, as well as the role of institutional factors on both the determinants and the impact of remittances. In addition, the role of cultural factors has been totally ignored. As such factors are important in IB scholarship, the incorporation of these in the analysis of remittances helps provide reverse knowledge transfer and cross fertilisation between the two fields.
More specifically our aims and intended contributions are as follows: bring the issue of remittances to the attention of IB scholarship and the analysis of globalisation;
integrate the analysis of remittances with the analysis of FDI and globalisation; draw on IB scholarship to help improve an understanding of the determinants of
remittances, not least by considering FDI as one such potential determinant; provide an improved conceptual framework on the determinants of remittances and the
channels through which they impact on economic performance; draw on IB scholarship in order to examine the moderating role of culture and institutions in the determinants of remittances and the relationship between remittances and economic performance, including the channels though which this relationship is manifested; provide improved understanding through extensive empirical analysis on the basis of a data set that is arguably the most comprehensive available to date; highlight the need for more targeted and integrated polices and managerial practices that take into consideration remittances and FDI, as well as their interrelationship and the institutional and cultural factors that affect them.
In terms of method, we have created a novel and comprehensive database specifically for this purpose, have used panel analysis, and have relied and built upon existing literature and employed estimated equations and methodological innovations (such as a ‘general to specific’ estimating technique) that aimed to help us derive more reliable results than hitherto available.
Following an introduction, the thesis starts by examining a canonical theme of IB scholarship, that of the determinants of FDI. We include independent variables such as productivity and profitability that have been previously overlooked, alongside more conventional variables analysed in literature. We report productivity to be one of the most significant factors determining FDI. We then also use a more
comprehensive dataset in order to test-replicate our results and include the cultural environment as a potential determinant of FDI. We find support for our earlier
results and also that individualism and uncertainty avoidance are positive and statistically significant determinants of FDI. The analysis of the determinants of FDI
sets the scene for our analysis of the determinants of remittances, and a prelude as to the factors that might help co-determine these two capital flows. We pursue this in
the next chapter, where we also consider FDI as one of the determinants of remittances.
In Chapter 3, we first provide an extensive analysis on the determinants of remittances. Our main contribution here lies in analysing cultural and institutional factors as potential determinants of remittances in addition to FDI. Our empirical results suggest a combination of ‘tempered altruism’ and ‘enlightened self-interest’ as motives for remittances and show that cultural and institutional factors can account for differences in the amounts of money remitted. In addition, our results suggest that FDI positively determines remittances. Our findings call for more targeted public policies that take this complementarity and the role of culture and institutions into account.
Our conceptual analysis and results in Chapter 4 demonstrate that the impact of remittances on economic performance is channelled through various pathways and is moderated by country-specific institutional and cultural factors. Our overall conclusion is that remittances, alongside FDI, are important positive determinants of
economic performance. In all, and despite some limitations that we also discuss, our analysis and results help
open up a new field of enquiry in IB scholarship and helps cross-fertilise IB with comparative political economy. They also provide important implications for public policy and managerial practice.