Do Remittances, FDI, and Digitalization Drive Household Welfare in Asian Developing Countries? The Moderating Role of Regulatory Quality
List of Authors
Kamaluddin
Keyword
Remittances; Foreign Direct Investment; Digitalization; Regulatory Quality; Household Welfare; LMIC; UMIC; Asian Developing Countries
Abstract
Asia’s economic growth has been strong, yet many households have not experienced matching welfare gains. This study examines the effects of remittances, foreign direct investment (FDI), and digitalization on household welfare in Asian lower middle income and upper middle-income countries. Annual panel data for 2010 to 2023 are analyzed using System GMM to address endogeneity, unobserved heterogeneity, and persistence, with robustness checks using alternative specifications and country level estimates. The results show that digitalization has a positive and the most consistent effect across both groups. Remittances are also positive, with a stronger impact in upper middle-income economies. FDI does not exhibit a stable effect at the household level. Regulatory quality, particularly in upper middle-income countries, amplifies the effect of digitalization, while its moderation of remittances is weak and not observed for FDI. Country level checks confirm substantial cross-country heterogeneity. Policy implications include expanding affordable digital infrastructure, strengthening digital literacy, deepening financial inclusion, and improving governance so that the benefits of digitalization and remittances shift from consumption toward household saving and investment. The study’s novelty lies in jointly mapping these three channels within a dynamic framework that distinguishes income groups and underscores the role of regulatory quality in transmitting gains to households.