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A recursive system is employed to investigate the indirect effect of out-migration on gross domestic product (GDP) through remittances in South Asia, namely Bangladesh, India, Nepal, Pakistan, and Sri Lanka. Out-migration is further disaggregated by skill level and country of destination (Middle East and other), and their effects on GDP through remittances are examined. The results suggest that migration and remittances have an important significant effect on the GDP of the countries under study. Of the skill categories, the unskilled category has the largest robust indirect effect on GDP. The effects of migration on GDP by country of destination suggest that migration to the Middle East has a robust and significant impact on GDP. There is some evidence of a combination between the altruistic and self-interested motives of migrants’ to remit.

Do Low-Skilled Migrants Contribute More to Home Country Income? Evidence from South Asia