Workers’ Remittances and Household Consumption Expenditure in Selected South Asian Countries

Abstract

The remittance inflow becomes as an important factor for economic development in developing countries especially in South Asian countries. It would affect exchange rate, investment, private consumption, poverty and economic growth, etc. The purpose of this paper is to investigate the impact of workers’ remittance inflow on household consumption expenditure in South Asian countries between 1987 and 2016. Study considered Bangladesh, India, Pakistan and Sri Lanka from South Asian region, based on the availability of data. The data of growth rate of remittance inflow and growth rate of household consumption obtained from World Development Indicator, World Bank Database. The study applied multiple linear regression model, Random effect model and fixed effect model to trace out the impact remittance inflow on household consumption expenditure in South Asian region. The multiple linear regression results suggested that growth rate of remittance inflow had a positive and significant impact on household consumption expenditure only in Bangladesh but insignificant impact in India, Pakistan and Sri Lanka. The fixed effect model revealed that remittance inflow had a negative and insignificant impact on household consumption expenditure in South Asian region. But, random effect model revealed that remittance inflow had a positive and insignificant impact on household consumption expenditure in selected South Asian region. Housman Test concluded that random effect model preferred to fixed effect model to explain the impact of workers’ remittance on household consumption expenditure in this selected South Asian region. Therefore, this study reports that growth rate of worker’s remittance has positive impact but exert no significant influence on growth rate of household consumption expenditure in this region during the study period.