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Revisiting the threshold effect of remittances on total factor productivity growth in South Asia: a study of Bangladesh and India

Kumar, R.R. and Stauvermann, P.J. and Kumar, Nikeel and Shahzad, S.J.H. (2018) Revisiting the threshold effect of remittances on total factor productivity growth in South Asia: a study of Bangladesh and India. Applied Economics, 50 (26). pp. 2860-2877. ISSN 0003-6846

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    Abstract

    Both Bangladesh and India are among the top recipient of remittances in absolute terms. However, in relative terms – remittances as a per cent of GDP – the two countries stand at 6.1% and 2.8%, respectively, well below the levels of the top 10 recipients. In this article, we explore the effect of remittances on the total factor productivity (TFP) growth considering Bangladesh and India, as reference countries over the periods 1980–2012 and 1977–2012, respectively. We examine the presence of a long-run association between remittances and TFP using a number of tests. The results indicate that remittances have threshold effects on TFP growth in both countries. Despite the two countries receiving substantial amount of remittances, we note that Bangladesh has a U-shaped relationship whereas India has an inverted U-shaped relationship with TFP growth. For Bangladesh, a minimum threshold of remittances (% GDP) is 5.3% and for India, a tipping point of remittances (% GDP) is at 1.8%. The causality tests confirm a bidirectional effect, which implies that remittances and TFP growth are mutually reinforcing. Interestingly, while the two economies have similar remittances impact in regards to causality, the study highlights two different tipping points of remittances.

    Item Type: Journal Article
    Subjects: H Social Sciences > HD Industries. Land use. Labor
    Divisions: Faculty of Business and Economics (FBE) > School of Accounting and Finance
    Depositing User: Ms Shalni Sanjana
    Date Deposited: 20 Jul 2018 10:47
    Last Modified: 20 Jul 2018 10:47
    URI: http://repository.usp.ac.fj/id/eprint/10926
    UNSPECIFIED

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