Do remittances impact on entrepreneurial activities? Evidence from a panel data analysis

Although remittances contribute towards improving the livelihoods of the recipients through income and consumption smoothing, evidence pointing to how they impact on entrepreneurial activities at cross country level has remained scanty. In this paper, we use dynamic panel procedures on data from 63 countries for the years 1981-2011, to examine the impact of remittances on entrepreneurial activities. Our main results indicate that remittances positively influence entrepreneurial activity, but this effect is more pronounced in low-income countries. From a policy perspective, our results suggest that a sustainable contribution of remittances to entrepreneurial activity especially in developing countries requires an unconstrained flow of remittances, and this can be ensured through building strong bilateral relationships and reducing bureaucratic procedures related to migration.