REMITTANCES, HUMAN CAPITAL AND INCLUSIVE DEVELOPMENT IN THE ECOWAS REGION


Fatai  Adedeji+     Oluwatosin Adeniyi+*

 

+Department of Economics, University of Ibadan, Ibadan

*Corresponding author: saino78@yahoo.com; +234 703 3275 062

 

ABSTRACT

An undeniable feature of the pattern of global growth particularly over the last two decades is the ascendancy of developing countries especially those in Sub-Saharan Africa (SSA). Needless to say that some of the best performers such as Ghana and Nigeria are members of the Economic Community of West African States (ECOWAS). Precisely, these countries have recorded far higher growth rates relative to other developing economies in Latin America and South Asia among others. This bright macroeconomic prospect notwithstanding, countries rank among the poorest in terms of multiple indices for assessing overall economic development. For instance, these countries have poor outcomes in terms of adult literacy, maternal mortality, infant mortality, school completion, ease of doing business, corruption control, electoral competition etc. Yet more striking is the characteristic of “joblessness” that has typically been attached to their recent growth episode. Proponents of this train of thought argue that the growth has failed to lead to significant transformation in the production structures of these economies thus limiting the job-creating potential of the impressive growth figures.

The elusive nature of development in SSA and ECOWAS in particular has a long history as a subject of extended debates among academics and policymakers alike. In pursuit of the explanations of the fundamental determinants of economic growth, capital accumulation has been identified as an important factor in several theoretical as well as empirical contributions. Several sources of foreign capital have also been as the appropriate channels owing to the dearth of domestic sources of finance for development. Several scholars have examined the role of foreign aid, foreign portfolio investments, external debt, foreign direct investment etc in the process of both growth and development with a sizeable number of studies focused on the ECOWAS region. More recently, however, emphasis has shifted to remittances as an option for mobilising external capital for the purpose of development finance. Particularly in the wake of the global financial crisis of 2008/2009, it was clearly observed that remittances were the most resilient to the shock. This shock-absorbing function is attributable to a number of benefits such as countercyclical effects on consumption, expansion in investment frontiers especially in housing construction as well as improvements in education and health indicators. Taken together, these features provide ample room for remittances to promote economic growth on one hand and create the necessary fiscal resources to support longer term development goals.

 

To shed light on the role of remittances in the process of development in the ECOWAS region we attempt to go into the details in analysing and evaluating the empirical validity of this hypothesized remittances-development nexus. More pointedly, we seek answers to the following research questions; does remittances make for more inclusiveness of economic growth in ECOWAS? What role does the level of human capital (HC) play in this remittances-inclusive growth connection? In what way(s) does this role of human capital vary by education and health indicators of HC?

We deploy data on seven ECOWAS countries with complete data on all the key variables of interest. Rather than the use of only panel econometric approaches that may obscure country specificities, we complimentarily conduct a country-by-country analysis on time series. This latter treatment is to make for findings that will provide policy implications relevant to each country in our sample. Tentative results appear to support the importance of remittance receipts in enhancing human capital on the one hand and creation of an economic environment suitable for better growth inclusiveness on the other hand. These findings have a number of relatable policy implications for policymakers going forward.  


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