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Are Immigrant Remittance Flows a Source of Capital for Development

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Author Info
Ralph Chami
Samir Jahjah
Connel Fullenkamp

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Abstract

The role of remittances in development and economic growth is not well understood. This is partly because the literatures on the causes and effects of remittances remain separate. We develop a framework that links the motivation for remittances with their effect on economic activity. Because remittances take place under asymmetric information and economic uncertainty, there exists a significant moral hazard problem. The implication is that remittances have a negative effect on economic growth. We test this prediction using panel methods on a large sample of countries. The results indicate that remittances do have a negative effect on economic growth, which indicates that the moral hazard problem in remittances is severe.

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Paper provided by International Monetary Fund in its series IMF Working Papers with number 03/189.

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Length: 47 pages
Date of creation: 22 Oct 2003
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Handle: RePEc:imf:imfwpa:03/189

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Related research
Keywords: Capital flows ; Economic growth ; Salary remittances ;

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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  8. Banerjee, Biswajit, 1984. "The probability, size and uses of remittances from urban to rural areas in India," Journal of Development Economics, Elsevier, vol. 16(3), pages 293-311, December. [Downloadable!] (restricted)
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  25. Brown, Richard P. C., 1997. "Estimating remittance functions for Pacific Island Migrants," World Development, Elsevier, vol. 25(4), pages 613-626, January. [Downloadable!] (restricted)
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