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Remittances and Institutions: Are Remittances a Curse?

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  • Abdih, Yasser
  • Chami, Ralph
  • Dagher, Jihad
  • Montiel, Peter

Abstract

This paper addresses the complex and overlooked relationship between the receipt of workers’ remittances and institutional quality in the recipient country. Using a simple model, we show how an increase in remittance inflows can lead to deterioration of institutional quality—specifically, to an increase in the share of funds diverted by the government for its own purposes. In a cross section of 111 countries we empirically verify this proposition and find that a higher ratio of remittances to GDP leads to lower indices of control of corruption, government effectiveness, and rule of law, even after controlling for potential reverse causality.

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Bibliographic Info

Article provided by Elsevier in its journal World Development.

Volume (Year): 40 (2012)
Issue (Month): 4 ()
Pages: 657-666

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Handle: RePEc:eee:wdevel:v:40:y:2012:i:4:p:657-666

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Web page: http://www.elsevier.com/locate/worlddev

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Keywords: remittances; institutions; corruption;

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References

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Citations

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Cited by:
  1. Cosimo BEVERELLI & Gianluca OREFICE & Nadia ROCHA, 2011. "Offshoring and migration in a world with policy spillovers," Departmental Working Papers 2011-25, Department of Economics, Management and Quantitative Methods at Università degli Studi di Milano.
  2. Faruk Balli & Faisal Rana, 2014. "Determinants of risk sharing through remittances: cross-country evidence," CAMA Working Papers 2014-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  3. Christian Ebeke & Thierry Yogo Urbain, 2013. "Working Paper 185 - Remittances and the Voter Turnout in Sub-Saharan Africa: Evidence from Macro and Micro Level Data," Working Paper Series 989, African Development Bank.
  4. Berdiev, Aziz N. & Kim, Yoonbai & Chang, Chun-Ping, 2013. "Remittances and corruption," Economics Letters, Elsevier, vol. 118(1), pages 182-185.
  5. Bettin, Giulia & Lucchetti, Riccardo & Zazzaro, Alberto, 2009. "Income, consumption and remittances: Evidence from immigrants to Australia," HWWI Research Papers 3-21, Hamburg Institute of International Economics (HWWI).
  6. Jean-Louis COMBES & Mathilde MAUREL & Christian EBEKE, 2013. "The effect of remittances prior to an election," Working Papers 201307, CERDI.
  7. Michael Clemens and David McKenzie, 2014. "Why Don't Remittances Appear to Affect Growth? - Working Paper 366," Working Papers 366, Center for Global Development.

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