Interplay of poverty, remittances and human capital development: Panel evidence from selected Sub‐Saharan African countries
| Published date | 01 December 2022 |
| Author | Rafiu Adewale Aregbeshola |
| Date | 01 December 2022 |
| DOI | http://doi.org/10.1111/imig.12986 |
250
|
International Migration. 2022;60:250–271.
wileyonlinelibrary.com/journal/imig
INTRODUCTION
Over the pas t decad es, glob alisation has increa sed the pace of geogr aphical mobility of labour, with an est i-
mated 272 million or 3. 5 per cent of the world populati on currently residing out side their country of bi rth (World
Migration Report, 2020: 2). This poo l of m igrants has contributed meaningfu lly to the global supply of skilled
labour and s pecialised expertise, especially in t he advan ced and newly industrialised countries . This diaspora
community has thus, over the past dec ades, not only contributed to the productivi ty of host co untries, but al so
contributed me aningfully to the develo pment of their countries of or igin through remitta nces.
Received: 24 July 20 20
|
Revised: 11 Januar y 2022
|
Accepted: 4 Febru ary 2022
DOI: 10.1111/imig.12986
ORIGINAL ARTICLE
Interplay of poverty, remittances and human
capital development: Panel evidence from
selected Sub- Saharan African countries
Rafiu Adewale Aregbeshola
© 2022 The Auth ors. Internation al Migration © 2022 Int ernational Orga nization for Migra tion.
Departm ent of Business Manage ment,
College of Econo mic and Management
Sciences, Un iversity of Sout h Africa,
Tshwane, South Afr ica
Correspondence
Rafiu Adewal e Aregbeshola, D epartment of
Business Man agement, College of E conomic
and Manageme nt Sciences, Unive rsity of
South Afric a, Preller Street , Muckleneuk
Ridge, City of Tshwa ne. P.O. Box 392 UNISA
0003, So uth Africa.
Email: aregbra@unisa.ac.za
Abstract
The positive effects of remitta nces on various m acro-
economic indicators h ave been documented in literature.
While a few studies investigated these effects o n poverty
alleviation, a few others have focused on access to technol-
ogy and education . However, mos t of th e studies deploy
single indicator, while a few others concentra ted on s pe-
cific countries. This study improves on literature by deploy-
ing composite index, to examine the ef fects of remittances
on human capital development in selecte d 18 African
countries. The stud y found that remitta nces improve the
joint me asures of human capital development, and its ef-
fects on access to education were meaningful. The stud y
thus sug gests optimal utilisation of remittances and fiscal
stabilisation to leverage the ef fects of remittances in im-
proving quality of live s in the recipient countries.
|
251
POVERTY, REMIT TANCES AND HCD IN SSA
The Global Knowledge Partnership on Migration and Development (KNOMAD) (2020), an arm of Th e World
Bank (2018: viii), shows that in rece nt years, the volume of remittan ces that flow into the low and middle- income
countries (LMICs) has exceed ed the flow of foreign direct investment (FDI – US$ 534 billion), as well as the official
development assistance (ODA) f rom advanced econ omies (US$ 166 billio n). On a global s cale and in spi te of the
decline in remittances over the past 2 ye ars (2019– 2021) due to the COVID- 19 pandemi c, the same s ource sug-
gests that the global stoc k of remittances was estimated to have exceeded US$ 666 billion in 2020, of which more
than 76 per cent (US$ 508 billion) flowed into the low- and middle- income countries. This figu re has surpassed the
US$ 548 billion recorded in 2019. Inflow of this form of capital into the developing econo mies, especially countries
in Africa, would have help ed to ameliorate capital gap that ha s hindered investments in capi tal- intensive develop-
mental projec ts, as well as the provision o f infrastructure, ove r the past decades.
Over the years, emigratio n from Africa has increased and remittances infl ow has also increased concomitantly.
For example, bet ween 2009 and 2018, remi ttances to SSA through t he formal financial plat forms increased from
US$ 29 billion to US$ 48 bi llion, from a growth rate of − 0.2 per cent to 13.7per cent (KNOMA D, 2020: 8).
The major le verage of remittan ces over other forms of capital inflow (such as FDI and ODA) is that it has the
potential to stabilis e development in the recipient economie s, especially because of its resil ience to economic and
political shocks. For instance, studies (Dr iffield & Jones, 2013; Ghosh, 20 06; Ratha & Mohapatr a, 2007) found
that inflow of remitt ances is more predictab le, less volatile and less counterc yclical as compared to ODA and FDI,
essentially in f ledgling developing econ omies, such as countries i n Africa.
Against this bac kdrop, a large number of studies have attempted to asce rtain the effect of remitt ances on var-
ious issues, rangin g from economic growth, reducti on in the level and prevalence of inequality, povert y alleviation
and enhan cement of investm ent in capita l projects i n the recipient economies. Howeve r, the studies are largely
either count ry specific, or they focussed nar rowly on a few measur able indicators of development. For in stance,
Adenutsi (2010) focus sed on human capital de velopment by using a single in dicator (secondary s chool enrolment
rate of total pop ulatio n) in sub- Sah aran Afr ican cou ntries . While Ad enutsi 's study (2010) is not only deficient in its
enumeration of human capital development (HCD), b ut also its time span of 20 years i s considered ineff icient to
draw strong conclusions on the virilit y of migration and remit tances in a broad manner. In another countr y- specific
stu dy, Ud ah (2011) proxied techn ological development with import ation of machines as measures of human devel-
opment, which i s considered insensitive to di rect human benefit s.
In another stu dy, Acosta (2011) stu died the impact of remit tances on child labo ur in El Salvador, while Adams
(2006) investigat ed the relationships between remitt ances, poverty a lleviation and investm ents in Guatemala . In
addition, Azam an d Raza (2016:128) summari sed some of the p revious studi es conducted on remit tances. Th e
study showed that most of t he documented studies d eployed a si ngle measure of human development (sc hool
attendance), rather than a broad array of measures as done in the current stud y. More importa ntly, most of th e
pre vious studie s cover ed ver y shor t perio d of tim e (most ly less than 20 years) — an appr oach t hat st ymied deep un-
derstand ing of long- run effects of remittances on the host econ omies, aside its susceptibilit y to estima tion errors.
This study imp roves on most of the previous st udies by covering far more Afr ican countries (18) over a longer
time span (49 years). More impor tantly, a composite index of human capit al development (HCD), which compri ses
school enrolment, household consumption, access to health care and acces s to technology, is develope d as a
broad measure of H CD— following the lead provided by S en (1981).
THEORETICAL APPRAISAL OF REMITTANCES
The neoclassica l economic theory (the macro theory) sugge sts that wage differentials and employme nt conditions
are the main dri vers of migration, in that migrant s are mainly interested in opt imising earnings while minimising
opportuni ty costs of wages (Lewis, 1954; Todaro, 1976). However, this theory only explains labo ur market through
Get this document and AI-powered insights with a free trial of vLex and Vincent AI
Get Started for FreeStart Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting
Start Your Free Trial of vLex and Vincent AI, Your Precision-Engineered Legal Assistant
-
Access comprehensive legal content with no limitations across vLex's unparalleled global legal database
-
Build stronger arguments with verified citations and CERT citator that tracks case history and precedential strength
-
Transform your legal research from hours to minutes with Vincent AI's intelligent search and analysis capabilities
-
Elevate your practice by focusing your expertise where it matters most while Vincent handles the heavy lifting