The environmental impact of remittance inflows in developing countries: evidence from method of moments quantile regression

Abstract

Abstract Despite the importance of remittance inflows as potential source of incomes for recipient households and one of main contributors to the development process in various developing countries, their environmental effects have been largely neglected in empirical literature. To fill this gap, the current study proposes an extension of the conventional environmental Kuznets curve (EKC) by performing a modified version based on remittance inflows in both Low- and middle-income countries (LMICs) from 1980 to 2014. Using the novel method of moments quantile regression with fixed effect (MM-QR), the outcomes provide evidence of an inverted N-Shaped EKC for remittances at higher CO2 emitters in lower-middle income countries (LMIC), proving that remittances allow recipient households to shift towards clean energy pattern (production/consumption). We find U-Shaped EKC for remittances from the 40th to 80th quantiles in upper middle-income countries (UMIC) along with monotonic negative effect on CO2 emissions at highest quantiles (90th and 95th ). No significant effect on environment has been outlined at lower CO2 emitters for all panels. Regarding GDP per capita, an inverted N-Shaped EKC has been observed across all quantiles in UMIC and from lower to middle quantiles in Low-income countries (LIC). Finally, financial development (FD), as control variable, exerts significant mixed effect on CO2 emissions, swung between positive at all quantiles in LMIC and UMIC and negative at lower quantiles in LIC. Some recommendations were further built in the present study.

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