Aysen Ustubici

Koç University

International Relations Department

Turkey

E-mail: austubici@ku.edu.tr

The Impact of Remittances on Human Development: a Quantitative Analysis and Policy Implications

Darja Irdam

The University of Cambridge Department of Sociology

UK

 E-mail: dirdam@ku.edu.tr

ABSTRACT. This paper contributes to the discussions on the nexus between migration and development by assessing the effects of remittances on human development. We do so first through a quantitative approach, and second, by elaborating the findings of our quantitative analysis within a broader theoretical and policy framework. By using OLS, we measure the impact of remittances on human development and compare it with the effect of foreign direct investment (FDI) and official development assistance (ODA). The findings indicate that remittances have a positive correlation with the human development level and are indeed an effective way to enhance human development in countries with medium income, especially in the medium run. We demonstrate that remittances show divergent developmental effects in countries with different government approaches to migration. In the second part of the paper, we discuss different hypotheses about the causes of the problems that our findings reveal and compare different actual policy solutions found in the developing world. We argue that remittances have the most positive effect in terms of boosting human development in the countries where the state perceives migration as an effective labour export strategy.

Received: November, 2011

1st Revision: January, 2012

Accepted: April, 2012

JEL Classification: F22, F24, O15,

Keywords: migration studies, human development, effects of remittances, quantitative analysis,