Foreign Remittances, Good Governance and Human Development in Sub-Saharan Africa: Evidence from FMOLS and DOLS
Abstract
Even though some progress has been recorded in terms of GDP growth in Sub-Saharan Africa, still the region has high level of extreme poverty, income inequality, insecurity, consequently low human development. This study examined the effect of foreign remittances and governance on human development for 20 countries of sub-Saharan Africa, using data from 1996 to 2019. The study used FMOLS and DOLS methods to estimates the long run coefficients. All the variables are I(1), have cross section dependency and cointegrated. The results revealed that foreign remittances and governance promote long run human development in sub-Saharan Africa. The results also show that inflation, population growth and military expenditures found to have negative long run effect on human development, while financial development have positive long run effect on human development in sub-Saharan Africa. Therefore, to promote human development, policies that will attract and encourage sending remittances through official channel should be put in place, especially related to the cost of sending remittances to sub-Saharan Africa. Also, policies to strengthen institutions and provide quality regulatory and legal framework for equitable distribution of resources to reduce poverty, and the cost of doing business, thereby promoting business activities, human capital development, consequently higher human development.
Downloads
References
Amega, K. (2018). Remittances, education and health in Sub-Saharan Africa. Cogent Economics and Finance, 6(1), 1–27. https://doi.org/10.1080/23322039.2018.1516488
Andrés, A. R., Amavilah, V., & Asongu, S. (2017). Linkages Between Formal Institutions, ICT Adoption, and Inclusive Human Development in Sub-Saharan Africa. In Catalyzing Development through ICT Adoption: The Developing World Experience (pp. 1–288). Springer International Publishing. https://doi.org/10.1007/978-3-319-56523-1
Asongu, S. A., & Roux, S. Le. (2016). Enhancing ICT for Inclusive Human Development in Sub-Saharan Africa (WP/16/029; A G D I Working Paper). https://www.econstor.eu/bitstream/10419/149953/1/agdi-wp16-029.pdf
Asongu, S., & Odhiambo, N. (2018). Doing business and inclusive human development in Sub-Saharan Africa. African Journal of Economic and Management Studies, 10(1). https://doi.org/10.1108/AJEMS-05-2018-0132
Asongu, S., Uduji, J. I., & Okolo-Obasi, E. N. (2019). Thresholds of External Flows for Inclusive Human Development in Sub-Saharan Africa. SSRN Electronic Journal. https://doi.org/10.2139/ssrn.3435733
Azam, M. (2016). Does governance and foreign capital inflows affect economic development in oic countries? Journal of Economic Cooperation and Development, 37(4), 21–50.
Azizi, S. S. (2018). The impacts of workers’ remittances on human capital and labor supply in developing countries. Economic Modelling, 75(July), 377–396. https://doi.org/10.1016/j.econmod.2018.07.011
Baltagi, B. H., & Pesaran, M. H. (2014). Heterogeneity and Cross Section Dependence In Panel Data Models: Theory and Applications. Journal of Application Econometrics, 21(August 2012), 1–21. https://doi.org/10.1002/jae
Bayar, Y., Gavriletea, M. D., & Ucar, Z. (2018). Financial Sector Development, Openness, and Entrepreneurship: Panel regression analysis. Sustainability (Switzerland), 10(10), 1–11. https://doi.org/10.3390/su10103493
Bhanumurthy, N., Prasad, M., & Jain, R. (2016). Public Expenditure , Governance and Human Development : Economic & Political Weekly, lIiI(171), 1–8.
Comim, F. (2016). Beyond the HDI? Assessing Alternative Measures of Human Development from a Capability Perspective. In Human Development Report. http://hdr.undp.org/sites/default/files/comim_template_0.pdf
Derviş, B., Semra, A., & Zübeyde, Ş. U. (2016). The Role of Human Capital in Economic Growt. Economics World, 4(3), 101–110. https://doi.org/10.17265/2328-7144/2016.03.001
Filippidis, I., & Katrakilidis, C. (2015). Finance, institutions and human development: Evidence from developing countries. Economic Research-Ekonomska Istrazivanja , 28(1), 1018–1033. https://doi.org/10.1080/1331677X.2015.1100839
Gillman, M., Harris, M. N., & Mátyás, L. (2019). Inflation and growth: Explaining a negative effect. Empirical Economics, 29(1), 149–167. https://doi.org/10.1007/s00181-003-0186-0
Gyimah-Brempong, K., & Asiedu, E. (2015). Remittances and investment in education: Evidence from Ghana. Journal of International Trade and Economic Development, 24(2), 173–200. https://doi.org/10.1080/09638199.2014.881907
Hashem, E. (2019). The Impact of Governance on Economic Growth and Human Development During Crisis in Middle East and North Africa. International Journal of Economics and Finance, 11(8), 61. https://doi.org/10.5539/ijef.v11n8p61
HDR-UNDP. (2020). Human Development Report 2020 -The Next Frontier: Human Development and the Anthropocene. http://hdr.undp.org/sites/all/themes/hdr_theme/country-notes/UGA.pdf
HDRO. (2016). What is Human Development? | Human Development Reports. In UNDP Human Development Reports. http://hdr.undp.org/en/content/what-human-development
Hemmati, A., Niakan, L., & Varahrami, V. (2018). The External Determinants of Inflation: The case of Iran. Iranian Economic Review, 22(3), 741–752. https://doi.org/10.22059/ier.2018.66641
Huay, C. S., Winterton, J., Bani, Y., & Matemilola, B. T. (2019). Do remittances promote human development? Empirical evidence from developing countries. International Journal of Social Economics, 46(10), 1173–1185. https://doi.org/10.1108/IJSE-12-2018-0673
Im, K. S., Pesaran, M. H., & Shin, Y. (2003). Testing for unit roots in heterogeneous panels. Journal of Econometrics, 115(1), 53–74. https://doi.org/10.1016/S0304-4076(03)00092-7
Imran, K. (2018). Foreign Remittances and Household-Based Human Development : A Regional Analysis of Punjab , Pakistan. Academy of Accounting and Financial Studies Journal, 22(02), 1–5.
Kadozi, E. (2019). Research in Globalization Remittance Inflows and Economic Growth in Rwanda. Research in Globalization, 1, 1–15. https://doi.org/10.1016/j.resglo.2019.100005
Kao, C. (1999). Spurious regression and residual-based tests for cointegration in panel data. Journal of Econometrics, 90(1), 1–44. https://doi.org/10.1016/S0304-4076(98)00023-2
Kausar, F., Sarwar, S., Rafiq, M. Y., Ali, R., & Rehman, R. U. (2019). Integrating migration, human development and remittances: an analysis of SAARC countries. International Journal of Happiness and Development, 5(2), 115. https://doi.org/10.1504/ijhd.2019.099354
Khraiche, M., & Boudreau, J. (2020). Can Lower Remittance Costs Improve Human Capital Accumulation in Africa? Journal of Policy Modeling, 42(5), 1000–1021. https://doi.org/10.1016/j.jpolmod.2020.04.005
Klosowicz, R. (2020). The Problem of Bad Governance as a Determinant of State Dysfunctionality in Sub -Saharan Africa. JKsięgarnia Akademicka,STOR, 56, 9–22. https://www.jstor.org/stable/26661991%0A
Levin, A., Lin, C. F., & Chu, C. S. J. (2002). Unit root tests in panel data: Asymptotic and finite-sample properties. Journal of Econometrics, 108(1), 1–24. https://doi.org/10.1016/S0304-4076(01)00098-7
Mardanov, I. (2020). Political and Economic Institutions and Human Development: Post-Communist Nations. Global Economy Journal, 20(1). https://doi.org/10.1142/S2194565920500062
Matuzeviciute, K., & Butkus, M. (2016). Remittances, Development Level, and Long-Run Economic Growth. Economies, 4(4), 28. https://doi.org/10.3390/economies4040028
Mbaku, J. M. (2020). Good and inclusive governance is imperative for Africa’s future. In Foresight Africa - Top priorities for the continent 2020-2030. https://www.brookings.edu/wp-content/uploads/2020/01/ForesightAfrica2020_Chapter2_20200110.pdf
Md. Akther, U., & Masih, M. (2015). Finance, growth and human development: An Islamic economic development perspective. Munich Personal RePEc Archive, November 2016.
Meyer, D., & Shera, A. (2017). The impact of remittances on economic growth: An econometric model. EconomiA, 18(2), 147–155. https://doi.org/10.1016/j.econ.2016.06.001
Mira, R., & Hammadache, A. (2017). Relationship Between Good Governance and Economic Growth: A Contribution to the Institutional Debate About State Failure in Developing Countries. SSRN Electronic Journal, 12, 1–20. https://doi.org/10.2139/ssrn.3464367
Muro, P. De, & Tridico, P. (2008). The role of Institutions for Human Development. Quinta Conferenza Internazionale Della “Human Development and Capability Association,” 1–16.
Naanwaab, C. (2018). Does Economic Freedom Promote Human Development? New Evidence from a Cross-National Study. The Journal of Developing Areas, 52(3), 183–198. https://doi.org/10.1353/jda.2018.0045
North, D. C. (1992). Institutions, Ideology, and Economic Performance. CATO Journal, 11(03), 1–28.
Nussbaum, M. C. (2000). Women and Human Development: The Capabilities Approach. In Cambridge University Press (1st editio). Cambridge University.
Othman, A. N., & Masih, M. (2015). Do profit and loss sharing (PLS) deposits also affect PLS financing? Evidence from Malaysia based on DOLS, FMOLS and system GMM techniques. Munich Personal RePEc Archive, 65224, 1–23. https://mpra.ub.uni-muenchen.de/65224/1/MPRA_paper_65224.pdf
Pedroni, P. (1999). Critical Values for Cointegration Tests in Heterogeneous Panels with Multiple Regressors. Oxford Bulletin of Economics and Statistics, 61(s1), 653–670. https://doi.org/10.1111/1468-0084.61.s1.14
Pesaran, M. H. (2007). A Simple Panel Unit Root Test in the Presence of Cross-Section Dependence. JOURNAL OF APPLIED ECONOMETRICS, 21(August 2012), 1–21. https://doi.org/10.1002/jae
Pesaran, M. H. (2015). Testing Weak Cross-Sectional Dependence in Large Panels. Econometric Reviews, 34(6–10), 1089–1117. https://doi.org/10.1080/07474938.2014.956623
Puatwoe, J. T., & Piabuo, S. M. (2017). Financial sector development and economic growth: evidence from Cameroon. Financial Innovation, 3(1). https://doi.org/10.1186/s40854-017-0073-x
Rapoport, H., & Docquier, F. (2005). The Economics of Migrants’ Remittances. In IZA Discussion Paper (No. 1521; IZA Discussion Paper). papers3://publication/uuid/FB64AD31-21AE-49CF-94C3-9E2D0146C1B2
Robeyns, I., & Byskov, M. F. (2020). The Capability Approach. In Stanford encyclopedia of philosophy (2nd Editio, pp. 1–25). Stanford Center. https://doi.org/10.5860/choice.42sup-0171
Sahoo, M., & Sethi, N. (2020). Does Remittance Inflow Promote Human Development in Sub-Saharan Africa? An Empirical Insight. Global Economy Journal, 20(04), 1–23. https://doi.org/10.1142/S2194565920500219
Sahoo, M., Sucharita, S., & Sethi, N. (2020). Does remittance inflow influence human development in south Asian countries? An empirical insight. Business Strategy and Development, 3(4), 578–589. https://doi.org/10.1002/bsd2.123
Sen, A. (1989). Human Development as Capability Expansion. In S. Fakuda-Parr & S. Kumar (Eds.), In Readings on Human Development: Concepts, Measures and Policies for a Development Paradigm (2nd Editio). Oxford University Press.
Shaikh, S. A., Ismail, A. G., Ismail, M. A., Shahimi, S., & Shafiai, M. H. M. (2019). Governance-Development Nexus in the OIC Countries. In Coperate and Shari’ah Governance in the Muslim world: Theory and Practice (pp. 1–411). Emerald Publishing.
Simplice, A., & Nwachukwu, J. C. (2016). The Role of Governance in Mobile Phones for Inclusive Human Development in Sub-Saharan Africa (WP/16/007; AGDI Working Paper). http://clok.uclan.ac.uk/25161/1/25161 Education-in-the-Diffusion-of-Knowledge-with-Mobile-for-Inclusive-dev.pd.pdf
Tahir, M., Khan, I., & Shah, A. M. (2015). Foreign Remittances, Foreign Direct Investment, Foreign Imports and Economic Growth in Pakistan: A Time Series Analysis. Arab Economic and Business Journal, 10(2), 82–89. https://doi.org/10.1016/j.aebj.2015.06.001
Tugcu, C. T. (2018). Panel Data Analysis in the Energy-Growth Nexus (EGN). In The Economics and Econometrics of the Energy-Growth Nexus. Elsevier Inc. https://doi.org/10.1016/B978-0-12-812746-9.00008-0
Uddin, M. A., Ali, M. H., & Masih, M. (2020). Institutions, Human Capital and Economic Growth in Developing Countries. Studies in Economics and Finance, 1–23. https://doi.org/10.1108/SEF-10-2019-0407
UNDP. (2019). Human Development Report 2019: Beyond income, beyond averages, beyond today. http://hdr.undp.org/sites/default/files/hdr2019.pdf
United Nations. (2019). International Migration Report. In Department of Economic and Social Affairs Population Division. https://www.un.org/en/development/desa/population/migration/publications/migrationreport/docs/InternationalMigration2019_Report.pdf
Verde, C., & Tome, S. (2019). As Africa Gains Development Ground , New Inequalities Emerge , says new UNDP report. http://hdr.undp.org/sites/default/files/en_hdr_2019_regional_press_release_-_africa_-_final.pdf
Yolanda, Y. (2017). Analysis of factors affecting inflation and its impact on human development index and poverty in Indonesia. European Research Studies Journal, 20(4), 38–56. https://doi.org/10.35808/ersj/873
Copyright (c) 2021 The Journal of Management Theory and Practice (JMTP)
This work is licensed under a Creative Commons Attribution 4.0 International License.
