Moderating Role of Institutional Quality in the Relationship Between Human Capital Flight, Remittances and Economic Growth: Evidence from SAARC Countries

Abstract

This study examines how institutional quality moderates the relationship between human capital flight, remittances, and economic growth in SAARC countries over the period 2000 to 2021, using System GMM estimation. The findings indicate that the human capital flight exerts a persistent adverse effect on economic growth, whereas remittances have a significant positive correlation with GDP growth. The analysis shows that while private credit and physical capital accumulation are robust drivers of economic growth, Foreign Direct Investment (FDI) and trade openness demonstrate statistically insignificant effects. The analysis further reveals that institutional quality has either a negative or an insignificant impact on growth, suggesting underlying governance inefficiencies or institutional misalignment. The study concludes that SAARC nations require context-specific policy interventions to retain skilled labour, strengthen institutions, and deepen financial markets, as conventional growth strategies may be ineffective without reforms that address the region's distinct socioeconomic barriers.