Africa's Money in Africa
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John Wiley & Sons Ltd, 9600 Garsington Road, Oxford OX4 2DQ, UK and 350 Main Street, Malden, MA 02148, USA.
Abstract
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Workers’ remittance and compensation of employees received in Sub-Sahara Africa (SSA)
increased from USD 1.398 billion in 1980 to USD 4.834 billion in 2000 and soared to USD
21.101 billion in 2010. The impact of remittance on recipient economy requires further empirical
investigation as there has not been consensus on whether remittance induces “financial
prodigality” or investment in Africa. Differing from extant studies, this study employed rule of law,
regulatory quality and government effectiveness as indicators of institutional quality. This is with
a view to exploring how institutional quality and financial depth interact with remittance to
influence investment in 44 African countries (1995-2010). The major finding from the study, inter
alia, is that institutional quality and financial depth play complimentary role in influencing
remittance for investment in Africa. This study concludes that the impact of Africa’s money in
Africa will be enhanced in the presence of reliable institutional quality and viable financial sector.
Thus, the side effect of “financial prodigality” that might be associated with remittance can be
ameliorated.
Keywords
HB Economic Theory