Abstract

This study uses country-level panel data covering the period from 2000 to 2014 to investigate the impact of remittances on the GDP per capita in nineteen member countries of the Common Market for Eastern and Southern Africa (COMESA) region. The one-step Generalized Method of Moments (GMM) difference estimator is used to estimate a dynamic panel of GDP per capita model. The results show that remittances from abroad exerts a positive and statistically significant impact on the GDP per capita in the COMESA region. Additionally, the absorptive capacity has a positive impact on growth and a positive effect on the ability of the COMESA region to absorb and benefit from the spillovers of remittances. The finding suggests that the region should strive to lower the costs of sending remittances, remove barriers to entry to the remittances market, introduce efficient technology systems and install tax or exemption schemes so as to redirect the uses of remittances to more productive sectors of the economy. The absorptive capacity of the region should also be improved so as to raise GDP per capita levels. (179 words).

Keywords:

Absorptive capacity, COMESA, generalized method of moments, growth, remittances,

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