The dynamic causal relationship between remittances, fertility and unemployment in South Africa

Abstract

In this study, the causal relationship between remittances, fertility and unemployment in South Africa is re-examined using annual data from 1990 to 2020. The study was motivated by the need to reconsider the nature of this relationship after a sharp increase in remittance inflows into the country. The findings from this study would inform fertility policies in South Africa. The question that this study seeks to answer is: Can remittances play a role in the lowering of fertility and unemployment levels in South Africa? The study used total fertility as a measure of fertility; remittances as a percentage of gross domestic product (GDP); and the strict definition of unemployment to examine the nature of the relationship between the three variables. Employing an autoregressive distributed lag (ARDL) approach to cointegration and the error correction model (ECM)-based causality model, the study found that there is a unidirectional causal flow from unemployment to fertility in the short run, and bidirectional causality between remittances and unemployment in both the short run and the long run. Bidirectional causality between fertility and remittances in the short run, and a unidirectional causal flow from fertility to remittances in the long run were also confirmed by the study. It can be concluded that South Africa may continue to formulate and implement policies that support remittance inflows in the battle against unemployment and high fertility rates. Policy implications are also discussed.