Page 11 - CITN 2017 Journal

development. The role of human capital in productive activity and by extension,
development has been a subject of research. The first ideas of new endogenous growth
theory appeared in Paul M. Romer's work on the “Increasing Returns and Long-Run
Growth” in 1986 and Robert E. Lucas‟ work on the “Mechanics of Economic
Development” in 1988. Unsatisfied with Solow's explanation, economists worked to
"endogenize" technology in the 1980s. They developed the endogenous growth theory that
includes a mathematical explanation of technological advancement. This model also
incorporated a new concept of human capital, the skills and knowledge that make workers
productive. Unlike physical capital, human capital has increasing rates of return.
Therefore, overall there are constant returns to capital, and economies never reach a steady
state. Growth does not slow as capital accumulates, but the rate of growth depends on the
types of capital a country invests in. Research done in this area has focused on what
increases human capital (e.g. education) or technological change (e.g. innovation).

The point must be made that many of the aforementioned studies did not focus on the
relationship between migrant remittance and economic development whose proxy is
social infrastructure in Nigeria. The available micro theories focus on the factors
influencing the decision on migrants to leave, how they analyse and weigh the cost and
benefits of migration (Boswell, 2002). The crucial question is: how are the huge resources
mobilized through remittances deployed or utilised? Russell (2002) examined the
macroeconomic impact of remittances and noted that with the continuous decline of
foreign direct investment and foreign aid, remittances have become a major source of
foreign exchange required to finance development activities. Given the above models and
findings and the increasing inflow of migrant remittances into Nigeria, what impact will
this have on economic development of the nation? Can migrant remittances be relied upon
as driver of economic development in Nigeria? Can the small informal remittances be
harnessed to form huge capital needed for investment in social infrastructure like health
and education?

Recent economic research shows that remittances, even when not invested, can have an
important multiplier effect (World Bank, 2006). One remittance dollar spent on basic
needs will stimulate retail sales, which stimulates further demand for goods and services,
which then stimulates output and employment (Lowell and de la Garza, 2000). Most of the
theoretical researches considering the multiplier effects of remittances use models that
capture both migration and remittances effects on welfare. They consider remittances as a
possible offset to the decline in output suffered by developing countries, caused by the loss
of trade opportunities as a result of emigration. The results show that if low-skilled
migrants emigrate, the welfare of the source country rises in the case that remittances are in
excess of the domestic income loss. If highly-skilled persons emigrate and/or if emigration
is accompanied by capital, remittances have a welfare increasing effect for the non-
migrants only when the capital/labour ratio of the source economy remains unchanged or
rises. If the capital/labour ratio falls, the welfare effect is indeterminate or even negative
(Quibria, 1997).

In spite of this, there are some indisputable welfare effects of migrant remittances. First,
remittances are an important source of income for many low and middle-income
households in developing countries. Second, remittances provide the hard currency
needed for importing scarce inputs that are not available domestically and also additional
savings for economic development (Ratha, 2003; Taylor, 1999; Quibria, 1997). But the
magnitude of the development impact of remittances on the receiving countries was
assumed by many scholars to depend on how this money was spent.

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