Do Remittances Have Asymmetric Impacts on Human Development? Panel Evidence from South Asia

Abstract

Globally, the remittances have increased significantly recently, most of which have gone to developing countries. In light of recent evidence of the role of remittances in economic development, it is pertinent to investigate how human development responds to remittances. Based on human capital and investment decision theory, the present study investigates the short and long-run asymmetric impacts on human development for six South Asian countries from 1990 to 2021 using the panel asymmetric autoregressive distributive lag model (PNARDL). A robustness check has been done using the dynamic common correlated effect pooled mean group effect model (CCEPMG). The direction of causality is examined using a panel dynamic heterogenous model. The result of this study indicates that remittances have a significant short and long-run asymmetric impact supporting the human capital and investment decision theory. Results suggest positive shocks promote human development while negative shocks have the opposite effect. Causality results suggest a two-way relationship supporting remittance-led human capital development in South Asia. In line with the above findings, the study recommends encouraging higher remittances and integrating development policies with migration policies to promote education, health, and human development.