Brain Drain Versus Brain Gain: The Study of Remittances in Southeast Asia and Promoting Knowledge Exchange Through Diasporas

The study attempts to identify the macroeconomic determinants of remittance inflows in South Asian countries. It uses additively separable utility function as theoretical framework and the Arellano-Bover/Blundell-Bond Systems of Generalized Method of Moments (SGMM) method as empirical framework. We use data on five countries in South Asia over the period 1976-2012. Results indicate that the remittance inflows in South Asia are altruistically motivated by the economic condition of home country whereas they are motivated by self-interest in case of the host country’s economic condition. The emigrant stocks abroad, financial development and political rights significantly and positively affect the remittance inflows. The impact of 9/11, 2001 on remittance inflows is also found significantly positive. This is probably as a result of receiving more remittances through formal channel instead of informal channel due to strict monetary regulation. The study implies that well managed financial, political and macroeconomic environment and pro- growth policy formulation are crucial to attract more remittances in this region.