DIGITALIZATION’S EFFECT ON INTERNATIONAL REMITTANCES: THE HINDRANCE OF INSTITUTIONAL QUALITY IN ADVANCED ECONOMIES

Abstract

Digital technology is crucial in reshaping economies by diminishing transactional barriers and fostering economic expansion. Concurrently, international remittance inflow is a potent tool for poverty alleviation and employment enhancement. The paper’s objective is to explore the impact of digitalization on international remittances within advanced economies and to analyze how the level of institutional development influences this relationship. The research utilizes Internet user rates and fixed broadband subscription statistics as indicators of digitalization and the difference GMM estimators for a panel dataset of 34 developed countries from 2002 to 2021. The results present a counter-intuitive that digitalization and governance promote international remittances, but their interaction terms reduce these remittances. Furthermore, trade openness enhances remittances, while economic growth impedes them. From these findings, some policy lessons are suggested to look for insights into the role of institutional quality in the digitalization–international remittances nexus.