Remittances, FDI, and Economic Growth in South Asia: Evidence from Panel Data - Rimesse di Denaro, Investimenti Diretti Esteri e Crescita Economica in Sud Asia: Evidenze da Dati Panel

This paper estimates the effect of FDI and remittances on economic growth in South Asia using an aggregate production function model. Time series data from 1976 to 2010 for India, Pakistan, Bangladesh and Sri Lanka is used to create the panel data. Time series properties of the panel data are diagnosed using panel unit root and panel cointegration tests and an error correction model is developed. The model is estimated using fixed effects estimator. The findings suggest that FDI has a positive effect on economic growth but remittances have a negative effect. A decrease in exports due to the Dutch Disease, a decrease in the labor force participation of the remittance receiving family, and public moral hazard problems could be possible reasons for the negative effect of remittances on economic growth