Abstract:
This study examines the multifaceted relationship between labor migration and economic
growth in Sri Lanka over the period 1990–2023, a context where remittances play a critical
role in sustaining the balance of payments, household incomes, and foreign reserves.
Utilizing time-series data and the Autoregressive Distributed Lag (ARDL) model, the
research evaluates both the short-run and long-run impacts of labor outmigration on
macroeconomic performance, incorporating key variables such as remittance inflows, labor
force participation, gross capital formation, and inflation in relation to GDP growth. The
empirical findings reveal that remittances exert a statistically significant positive influence
on long-term economic growth, underscoring their role as a vital external financial resource
that supports household consumption and investment. However, excessive outmigration,
particularly of skilled and semi-skilled workers, poses risks to domestic productivity and
innovation potential, raising concerns about long-term growth sustainability. Inflation is
found to negatively affect economic growth, while gross capital formation and labor force
participation contribute positively, highlighting the importance of a balanced
macroeconomic environment in leveraging the benefits of labor migration. Diagnostic and
stability tests confirm the robustness of the model, ensuring the reliability of the results.
Based on these insights, the study recommends a multi-pronged policy framework that
promotes the productive use of remittances, strengthens reintegration mechanisms for return
migrants, and ensures macroeconomic stability to mitigate the adverse impacts of excessive
labor outflows. Additionally, fostering financial inclusion and institutional support for
migrants can enhance the developmental impact of labor migration. This research
contributes to the broader discourse on migration and development by providing empirical
evidence to guide policies aimed at optimizing labor migration as a tool for sustainable and
inclusive economic growth in Sri Lanka.
