Remittances or technological diffusion: Which is more important for generating economic growth in developing countries?

This study examines the impact that technological diffusion and international migrants� remittances have on the economic development of developing countries. The hypothesis that skilled workers, living and working overseas, can effectively channel technological knowledge back to their home country, contributing to that country�s economic growth, is tested utilising data on the stock of high skilled workers from 50 developing countries working in industrialised countries over the last two decades. Results obtained lend strong support to this hypothesis. In addition, the effect that remittances from workers in developed countries, which are used for investment purposes in developing countries, have on the rate of growth of those developing economies is also investigated. Empirical evidence indicates that the remittances channel exerts a significant, positive impact on growth. More interestingly, the contribution of such investment-oriented remittances to driving sustainable economic development appears to be of relatively greater importance that of technological diffusion.