The Impact of Remittance Inflows on Economic Complexity: A Quantile CS-ARDL Analysis for LAC Countries

This study investigates the impact of remittance inflows on economic complexity across 11 Latin American and Caribbean (LAC) countries from 1996 to 2023.While remittances are a major source of external financing, this research examines whether they trigger the "Dutch Disease" or facilitate structural transformation.Utilizing panel quantile methodologies to account for cross-sectional dependence and structural heterogeneity, the findings reveal quantile-dependent relationship.Utilizing panel quantile methodologies to account for cross-sectional dependence and structural heterogeneity, the findings reveal a statistically constrained and localized relationship.In the lower and median quantiles, remittance inflows do not exert a statistically significant long-run effect on economic complexity.However, at higher quantiles of economic complexity, remittances demonstrate a statistically significant positive longrun impact under specific model specifications.This implies that remittances do not function as a generalized driver of structural transformation, but rather play a highly conditional role that supports economic sophistication only in economies that already possess relatively advanced structural capabilities and absorptive capacity.The study's originality lies in its identification of a distributional heterogeneity, suggesting that the transformative power of remittances is contingent upon a nation's absorptive capacity.Policy recommendations focus on channeling these flows into productive investments to support industrial capabilities.