Financial Inflows and Welfare: A Comparative Panel Analysis of Remittances and FDI in Latin America (1990–2023)
Financial Inflows and Welfare: A Comparative Panel Analysis of Remittances and FDI in Latin America (1990–2023)

Summary/Abstract: This study evaluates the comparative impact of personal remittances and Foreign Direct Investment (FDI) on the Human Development Index (HDI) across Latin American countries over a 33-year period (1990–2023). Using a robust panel data econometric framework, the research tests the hypothesis that different external financial flows yield divergent outcomes for social welfare and human capital accumulation. The findings indicate that while both inflows contribute positively to development, remittances show a more direct correlation with immediate poverty reduction and household-level human capital investment (education and health), whereas FDI serves as a long-term driver of macroeconomic growth and structural transformation. The results highlight a regional "development duality" where remittance-dependent economies achieve different social milestones compared to FDI-driven ones. The study provides critical policy implications for Latin American governments, emphasising the need for structural reforms to improve productive absorption of remittances and social spillover effects of foreign capital.

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