Migrant remittances and human capital investments

The objective of thispaper is to investigate the effect of migrant remittances on human capital investments in remittance receiving countries. Prior studies have generally focused on the effects of remittances on consumption and poverty reduction, without much effort given to human capital investments. We seek to fill this void by using a panel dataset comprising 71 developing countries drawn from the World Bank's six regions to analyze the impact of remittance receipts on investment in human capital. The methodology we employ in the analysis is based on a systems approach using three stage least squares regressions to account for endogeneity and/or simultaneity bias of remittances. Contrary to previous findings that remittances only support consumption and yield no social returns, we find that remittances do have a positive and significant effect on two measures of human capital investments, educational spending and healthcare spending.