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Remittances and Institutions

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Author Info

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

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. Empirical testing of this proposition is complicated by the likelihood of reverse causality. In a cross section of 111 countries we document a negative impact of the ratio of remittance inflows to GDP on domestic institutional quality, even after controlling for potential reverse causality. We find that a higher ratio of remittances to GDP is associated with lower indices of control of corruption, government effectiveness, and rule of law.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/29.

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Length: 31
Date of creation: 01 Feb 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/29

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Related research

Keywords: Workers remittances; Economic growth; remittances; remittance; real gdp; gdp per capita; coefficient on remittances; remittance flows; workers ? remittances; remittance inflows; migration; remitter; impact of remittances; private consumption; access to remittance; capital formation; average remittance; effects of remittance; formal remittances; effect of remittance; worker remittances; economic implications of remittances; informal remittances; impact of remittance; immigrant remittance; remittance channel; benefits of remittances; coefficients on remittances; increase in remittance; remittance receipts; remittance-receiving household; effect of remittances; total factor productivity;

This paper has been announced in the following NEP Reports:

References

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  1. Poterba, James M & Rotemberg, Julio J, 1990. "Inflation and Taxation with Optimizing Governments," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 22(1), pages 1-18, February.
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  3. Rafael La Porta & Florencio Lopez-de-Silanes & Andrei Shleifer & Robert Vishny, 1998. "The Quality of Goverment," NBER Working Papers 6727, National Bureau of Economic Research, Inc.
  4. Marcelo J. Moreira, 2003. "A Conditional Likelihood Ratio Test for Structural Models," Econometrica, Econometric Society, vol. 71(4), pages 1027-1048, 07.
  5. Gallup, J.L. & Sachs, J.D. & Mullinger, A., 1999. "Geography and Economic Development," Papers 1, Chicago - Graduate School of Business.
  6. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, vol. 76(3), pages 399-457, June.
  7. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  8. Pablo A. Acosta & Emmanuel K.K. Lartey & Federico S. Mandelman, 2007. "Remittances and the Dutch disease," Working Paper 2007-08, Federal Reserve Bank of Atlanta.
  9. Xavier Sala-i-Martin & Arvind Subramanian, 2013. "Addressing the Natural Resource Curse: An Illustration from Nigeria," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(4), pages 570-615, August.
  10. Beine, Michel & Docquier, Frédéric & Rapoport, Hillel, 2003. "Brain Drain and LDCs' Growth: Winners and Losers," IZA Discussion Papers 819, Institute for the Study of Labor (IZA).
  11. Douglas Staiger & James H. Stock, 1997. "Instrumental Variables Regression with Weak Instruments," Econometrica, Econometric Society, vol. 65(3), pages 557-586, May.
  12. Michael T. Gapen & Thomas F. Cosimano & Ralph Chami, 2006. "Beware of Emigrants Bearing Gifts," IMF Working Papers 06/61, International Monetary Fund.
  13. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, vol. 89(4), pages 982-993, September.
  14. Cai, Hongbin & Treisman, Daniel, 2004. "State corroding federalism," Journal of Public Economics, Elsevier, vol. 88(3-4), pages 819-843, March.
  15. Samir Jahjah & Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development," IMF Working Papers 03/189, International Monetary Fund.
  16. Aggarwal, Reena & Demirguc-Kunt, Asli & Martinez Peria, Maria Soledad, 2006. "Do workers'remittances promote financial development ?," Policy Research Working Paper Series 3957, The World Bank.
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Citations

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Cited by:
  1. Sarah Jacobson & Ragan Petrie, 2010. "Favor Trading in Public Good Provision," Department of Economics Working Papers 2010-19, Department of Economics, Williams College, revised Apr 2013.
  2. Chami Ralph & Hakura Dalia S. & Montiel Peter J., 2012. "Do Worker Remittances Reduce Output Volatility in Developing Countries?," Journal of Globalization and Development, De Gruyter, vol. 3(1), pages 1-25, June.
  3. Yasser Abdih & Ralph Chami & Christian Ebeke & Adolfo Barajas, 2012. "Remittances Channel and Fiscal Impact in the Middle East, North Africa, and Central Asia," IMF Working Papers 12/104, International Monetary Fund.
  4. Jeffrey A. Edwards & Jennis J. Biser, 2011. "The interactive effect of remittances and civil liberties on investment and consumption," International Journal of Development Issues, Emerald Group Publishing, vol. 10(1), pages 20-33, April.
  5. repec:ebl:ecbull:v:30:y:2010:i:1:p:351-364 is not listed on IDEAS
  6. Sami Ben Mim (ERUDITE) & Fatma Mabrouk (GREThA, CNRS, UMR 5113), 2011. "Remittances and economic growth: what channels of transmission? (In French)," Cahiers du GREThA 2011-28, Groupe de Recherche en Economie Théorique et Appliquée.
  7. Combes, Jean-Louis & Ebeke, Christian, 2011. "Remittances and Household Consumption Instability in Developing Countries," World Development, Elsevier, vol. 39(7), pages 1076-1089, July.
  8. Michael T. Gapen & Ralph Chami & Peter Montiel & Adolfo Barajas & Connel Fullenkamp, 2009. "Do Workers' Remittances Promote Economic Growth?," IMF Working Papers 09/153, International Monetary Fund.
  9. Christian Ebeke, 2011. "The power of Remittances on the Prevalence of Child Labor," Working Papers halshs-00554258, HAL.
  10. Dalia Hakura & Ralph Chami & Peter Montiel, 2009. "Remittances," IMF Working Papers 09/91, International Monetary Fund.
  11. 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).
  12. Christian EBEKE, 2010. "Transferts des migrants, ouverture sur l'extérieur et dépenses publiques dans les pays en développement," Working Papers 201011, CERDI.
  13. Ratha, Dilip & Mohapatra, Sanket & Scheja, Elina, 2011. "Impact of migration on economic and social development : a review of evidence and emerging issues," Policy Research Working Paper Series 5558, The World Bank.
  14. Pfutze, Tobias, 2012. "Does migration promote democratization? Evidence from the Mexican transition," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 159-175.

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