The present study reviews the theoretical and empirical literature about the significance of international migrants' remittance to empirically analyse the effect of remittance on the productivity growth of developing countries using a panel dataset from 1991 to 2021.
The study utilised the data envelopment analysis (DEA)-based Malmquist Productivity Index (MPI) to measure nationwide production efficiencies. It first performed a unit root test, cointegration test and pool mean group autoregressive distributed lag (PMG-ARDL) technique. To assess the robustness of the findings, the study also uses dynamic ordinary least squares (DOLS) and fully modified OLS (FMOLS) estimators.
The results demonstrated that remittances are a significant source of funding that promotes innovation [i.e. technological progress (TEC)] and hastens the country's total factor productivity (TFP) growth. However, the study needed to have established the effect of inward remittances on the nation's technical efficiency (EFF).
As remittances encourage innovation and TFP growth (TFPG), the concerned governments must create favourable and enabling economic environments to increase remittance inflows, which will have far-reaching growth repercussions.
The present study emphasises the connection between remittances and productivity growth, the disintegration of TFP, advanced econometric techniques and contribution to research policy. Despite prior literature exploring the effect of remittances on economic growth, a dearth of literature exists on how remittances affect a country's productivity. The output-based MPI methodology used in this study offered a nuanced understanding of how remittances affect many facets of productivity growth in developing nations.
