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Structural transformation, urbanization, and remittances in developing countries: A panel VAR analysis

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posted on 2023-06-19, 12:06 authored by Syed Abbas, Saroja Selvanathan, Eliyathamby A. Selvanathan

 Structural transformation and urbanization have increased greatly in developing countries over the last few decades. Migrant remittances—private external financial flows—have also grown phenomenally during this period. The literature reveals a significant causal relationship between urbanization and economic growth and considers urban cities to be the engines of growth. However, investigation into the link between structural transformation, urbanization, and remittances is missing in the literature. This study aims to fill that gap by investigating the relationship between structural transformation, urbanization, remittances, and GDP growth in developing countries. After finding no long-run relationship between the respective variables, this study applies vector autoregressive modelling to determine their short-run dynamic causal relationship, using panel data from 95 developing countries for the period 1980–2018. Its findings suggest that there is a two-way (bi-directional) causal relationship between structural transformation and urbanization, structural transformation and GDP growth, urbanization and GDP growth, and urbanization and remittances. Rapid urbanization can increase housing prices and overall urban living costs, which may increase remittance flows that support consumption. Likewise, increased urban infrastructure development may also attract remittances to real-estate investment, leading to further urbanization. 

History

Published in

Economic Analysis and Policy

Publisher

Elsevier

Version

  • VoR (Version of Record)

Citation

Abbas, S. A., Selvanathan, S., & Selvanathan, E. A. (2023) 'Structural transformation, urbanization, and remittances in developing countries: A panel VAR analysis', Economic Analysis and Policy. doi: 10.1016/j.eap.2023.06.010

Print ISSN

0313-5926

Electronic ISSN

2204-2296

Cardiff Met Affiliation

  • Cardiff School of Management

Cardiff Met Authors

Syed Abbas

Cardiff Met Research Centre/Group

  • Welsh Centre for Business and Management Research

Copyright Holder

  • © The Authors

Language

  • en

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