The Effect of Remittances on Economic Growth. A Comparative Analysis of Pakistan, Indonesia, and India
DOI:
https://doi.org/10.30742/equilibrium.v22i1.5304Keywords:
Remittances, Economic Growth, Gross capital formation, inflationAbstract
This study examines the impact of workers Remittances on economic growth in three developing countries Pakistan, Indonesia, India during the period 2010-2024 using panels data analysis. Remittances have become an important source of external finance for a lot of developing economies, and they often are expected to contribute to income growth and development. The objective of this research is to find out whether remittances have a significant impact on economic growth in selected countries. The research is based on secondary data gathered from the World Bank. Economic growth is the Gross Domestic Product (GDP), while the independent variable is the remittances by workers. Gross capital formation and inflation are added as control variables to account for investment and macroeconomic stability. The analysis considers Pooled Ordinary Least Squares and Random Effects panel models and the Hausman test is applied to determine the most appropriate estimation method. The results show that the Random Effects model is the most appropriate specification. The results indicate that there is a positive impact of remittances on economic growth. In contrast, gross capital formation has a positive and significant impact while inflation has a negative effect on economic growth. These results suggest that while remittances provide a contribution to the national income, the contribution of remittances to economic growth is insignificant for the selected countries. The study emphasizes the role of productive investment and macroeconomic stability for sustainable growth and recommends that policymakers should promote the more productive use of remittances to support long-term economic development.
References
Abbas, Syed Ali, Eliyathamby A Selvanathan, and Saroja Selvanathan. 2024. “Impact of COVID-19 on Migrant Remittances in South Asia.” Applied Economics 56 (60): 9046–59. https://www.tandfonline.com/doi/abs/10.1080/00036846.2023.2297740
Adams Jr, Richard H, and Alfredo Cuecuecha. 2010. “The Economic Impact of International Remittances on Poverty and Household Consumption and Investment in Indonesia.” World Bank Policy Research Working Paper, no. 5433. https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1683904
Adow, Abdirahman Abdullahi. 2025a. “Remittances and Economic Growth in East Africa.” Cogent Economics & Finance 13 (1): 2461604. https://www.tandfonline.com/doi/abs/10.1080/23322039.2025.2461604
Afif, Mr Syaiful. 2020. The Rising of Middle Class in Indonesia: Opportunity and Challenge. https://cipe.umd.edu/conferences/DecliningMiddleClassesSpain/Papers/Afif.pdf
Annisa, Rahma, and Akhmad Jayadi. 2024. “The Effect of Remittances on Indonesia’s Economic Growth and Exchange Rate.” DLSU Business & Economics Review 33 (2). https://animorepository.dlsu.edu.ph/cgi/viewcontent.cgi?article=1040&context=ber
Cazachevici, Alina, Tomas Havranek, and Roman Horvath. 2020. “Remittances and Economic Growth: A Meta-Analysis.” World Development 134 (October): 105021. https://doi.org/10.1016/j.worlddev.2020.105021.
Chami, Ralph, Connel Fullenkamp, and Samir Jahjah. 2005. “Are Immigrant Remittance Flows a Source of Capital for Development?” IMF Staff Papers 52 (1): 55–81. https://link.springer.com/article/10.2307/30035948
Dahal, Arjun Kumar, Prem Bahadur Budhathoki, and Ganesh Bhattarai. 2024. “Exploring the Impact of Remittance and Economic Growth on Inflation.” Socioeconomic Challenges (SEC) 8 (2). https://armgpublishing.com/journals/sec/volume-8-issue-2/article-8/
Dastidar, S. G., and N. Apergis. 2022. “Do Remittances Promote Economic Growth? New Evidence from India.” Economic Issues Journal Articles 27 (1): 11–37. https://economicissues.org.uk/Files/2022/EI_March2022_dastidar.pdf
Giuliano, Paola, and Marta Ruiz-Arranz. 2009. “Remittances, Financial Development, and Growth.” Journal of Development Economics 90 (1): 144–52. https://www.sciencedirect.com/science/article/pii/S0304387808001077
Guerrero, Richard Arturo Garcia. 2024a. Assessing the Effect of Remittances on Refugee and Displacement Patterns in Latin America and the Caribbean. https://search.proquest.com/openview/b54f906acd6c17ee71791936479cf581/1?pq-origsite=gscholar&cbl=18750&diss=y
Guerrero, Richard Arturo Garcia. 2024c. Assessing the Effect of Remittances on Refugee and Displacement Patterns in Latin America and the Caribbean. https://search.proquest.com/openview/b54f906acd6c17ee71791936479cf581/1?pq-origsite=gscholar&cbl=18750&diss=y
Khan, Ahsan Aslam, Mohammad Helmi Bin Hidthir, Mustazar Mansur, and Zaki Ahmad. 2025. “Role of Financial Inclusion in Enhancing the Effect of Remittance on Economic Growth in Developing Countries.” Cogent Economics & Finance 13 (1): 2476093. https://www.tandfonline.com/doi/abs/10.1080/23322039.2025.2476093
Khan, Imran. 2024. “Analyzing the Impact of Positive and Negative Remittance Inflow Shocks on Economic Growth of India.” Journal of Economic Studies 51 (2): 338–56. https://www.emerald.com/jes/article-abstract/51/2/338/1234402
Maldonado, René, and Jeremy Harris. 2022. Remittances to Latin America and the Caribbean in 2021. Migrant Efforts during the COVID-19 Crisis. https://publications.iadb.org/en/remittances-latin-america-and-caribbean-2023
Monterroso, Oscar, and Diego Vilán. 2025. Global Remittances Cycle. https://www.federalreserve.gov/econres/notes/feds-notes/global-remittances-cycle-20250227.html?utm_source=perplexity
Nkhoma, Ryne Sammy. 2025. Analyzing the Effectiveness of Remittances on Economic Growth in a Dollarized Economy: Case Study Zimbabwe. https://www.diva-portal.org/smash/record.jsf?pid=diva2:1986573
Poisson, Justin. 2018. The Effect of Remittance Inflows to India: An Empirical Analysis. https://scholars.unh.edu/honors/396/
Pradhan, Kalandi Charan, Lingaraj Mallick, and Kalu Naik. 2025. “Remittance and Economic Growth Nexus in BRICS Countries: Evidence from PSTR with Endogeneity.” Research in Economics 79 (2): 101032. https://www.sciencedirect.com/science/article/pii/S1090944325000092
Rao, Nitya, Reema Sathe, and Natasha Grist. 2025. “Gender, Intersectionality and Climate Smart Agriculture in South Asia: A Review.” PLOS Climate 4 (2): e0000482. https://journals.plos.org/climate/article?id=10.1371/journal.pclm.0000482
Rashid, Muhammad Khalid, Shaffaq Shaffaq, and Muhammad Atiq ur Rehman. 2025. “ASSESSING THE IMPACT OF MIGRANT WORKER’S REMITTANCES ON GDP GROWTH: AN EMPIRICAL STUDY ON THE ECONOMY OF PAKISTAN.” Contemporary Journal of Social Science Review 3 (3): 1430–36. https://contemporaryjournal.com/index.php/14/article/view/1122
Sholehah, Fithaloka Hartinawati, and Palupi Lindiasari Samputra. 2025. “The Effect of Migrant Worker Remittances on Economic Growth in Low-and Middle-Income Developing Countries: A Systematic Literature Review.” Asian Journal of Engineering, Social and Health 4 (7): 1064–77. https://ajesh.ph/index.php/gp/article/view/597
Solow, Robert M. 2016. “Resources and Economic Growth.” The American Economist 61 (1): 52–60. https://doi.org/10.1177/0569434515627092 https://journals.sagepub.com/doi/abs/10.1177/0569434515627092
Taguchi, Hiroyuki, and Bushra Batool. 2025. “Threshold Effects of Emigrant’s Remittances on Dutch Disease and Economic Growth in Pakistan.” Economies 13 (6): 156. https://www.mdpi.com/2227-7099/13/6/156
Topxhiu, Rahmije Mustafa, and Florentina Xhelili Krasniqi. 2025. “Remittances, Financial Development and Economic Growth-A Dynamic Panel Data Approach.” Contemporary Economics 19 (2). https://www.ceeol.com/search/article-detail?id=1365011
Downloads
Published
Issue
Section
License
Copyright (c) 2026 p-ISSN 1693-1378 | e-ISSN 2598-9952
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Authors who publish with this journal agree to the following terms:
- Authors retain copyright and grant the journal right of first publication with the work simultaneously licensed under a Attribution-ShareAlike 4.0 International (CC BY-SA 4.0) License that allows others to share the work with an acknowledgement of the work's authorship and initial publication in this journal.
- Authors are able to enter into separate, additional contractual arrangements for the non-exclusive distribution of the journal's published version of the work (e.g., post it to an institutional repository or publish it in a book), with an acknowledgement of its initial publication in this journal.
- Authors are permitted and encouraged to post their work online (e.g., in institutional repositories or on their website) prior to and during the submission process, as it can lead to productive exchanges, as well as earlier and greater citation of published work
