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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;

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References

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  3. 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).
  4. Samir Jahjah & Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development," IMF Working Papers, International Monetary Fund 03/189, International Monetary Fund.
  5. Pablo A. Acosta & Emmanuel K.K. Lartey & Federico S. Mandelman, 2007. "Remittances and the Dutch disease," Working Paper, Federal Reserve Bank of Atlanta 2007-08, Federal Reserve Bank of Atlanta.
  6. 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.
  7. Michael T. Gapen & Thomas F. Cosimano & Ralph Chami, 2006. "Beware of Emigrants Bearing Gifts," IMF Working Papers, International Monetary Fund 06/61, International Monetary Fund.
  8. James M. Poterba & Julio J. Rotemberg, 1988. "Inflation And Taxation With Optimizing Governments," NBER Working Papers 2567, National Bureau of Economic Research, Inc.
  9. Gallup, J.L. & Sachs, J.D. & Mullinger, A., 1999. "Geography and Economic Development," Papers, Chicago - Graduate School of Business 1, Chicago - Graduate School of Business.
  10. La Porta, Rafael & Lopez-de-Silanes, Florencio & Shleifer, Andrei & Vishny, Robert, 1999. "The Quality of Government," Journal of Law, Economics and Organization, Oxford University Press, Oxford University Press, vol. 15(1), pages 222-79, April.
  11. Cai, Hongbin & Treisman, Daniel, 2004. "State corroding federalism," Journal of Public Economics, Elsevier, Elsevier, vol. 88(3-4), pages 819-843, March.
  12. Robert E. Hall & Charles I. Jones, 1999. "Why Do Some Countries Produce So Much More Output per Worker than Others?," NBER Working Papers 6564, National Bureau of Economic Research, Inc.
  13. Marcelo J. Moreira, 2003. "A Conditional Likelihood Ratio Test for Structural Models," Econometrica, Econometric Society, Econometric Society, vol. 71(4), pages 1027-1048, 07.
  14. 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.
  15. Treisman, Daniel, 2000. "The causes of corruption: a cross-national study," Journal of Public Economics, Elsevier, Elsevier, vol. 76(3), pages 399-457, June.
  16. Rafael Di Tella & Alberto Ades, 1999. "Rents, Competition, and Corruption," American Economic Review, American Economic Association, American Economic Association, vol. 89(4), pages 982-993, September.
  17. Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse," IMF Working Papers, International Monetary Fund 03/139, International Monetary Fund.
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Citations

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Cited by:
  1. Giulia Bettin & Riccardo Lucchetti & Alberto Zazzaro, 2009. "Income, consumption and remittances: evidence from immigrants to Australia," Mo.Fi.R. Working Papers, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences 34, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  2. Sarah Jacobson & Ragan Petrie, 2010. "Favor Trading in Public Good Provision," Department of Economics Working Papers, Department of Economics, Williams College 2010-19, Department of Economics, Williams College, revised Apr 2013.
  3. Ebeke, Christian Hubert, 2012. "The power of remittances on the international prevalence of child labor," Structural Change and Economic Dynamics, Elsevier, Elsevier, vol. 23(4), pages 452-462.
  4. Christian EBEKE & Jean-Louis COMBES, 2010. "Remittances and Household Consumption Instability in Developing Countries," Working Papers 201015, CERDI.
  5. 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, Emerald Group Publishing, vol. 10(1), pages 20-33, April.
  6. Pfutze, Tobias, 2012. "Does migration promote democratization? Evidence from the Mexican transition," Journal of Comparative Economics, Elsevier, vol. 40(2), pages 159-175.
  7. Christian EBEKE, 2010. "Transferts des migrants, ouverture sur l'extérieur et dépenses publiques dans les pays en développement," Working Papers 201011, CERDI.
  8. Ralph Chami & Dalia Hakura & Peter Montiel, 2010. "Do Worker Remittances Reduce Output Volatility in Developing Countries?," Department of Economics Working Papers, Department of Economics, Williams College 2010-17, Department of Economics, Williams College.
  9. 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, International Monetary Fund 12/104, International Monetary Fund.
  10. repec:ebl:ecbull:v:30:y:2010:i:1:p:351-364 is not listed on IDEAS
  11. Michael T. Gapen & Ralph Chami & Peter Montiel & Adolfo Barajas & Connel Fullenkamp, 2009. "Do Workers' Remittances Promote Economic Growth?," IMF Working Papers, International Monetary Fund 09/153, International Monetary Fund.
  12. Sami Ben Mim (ERUDITE) & Fatma Mabrouk (GREThA, CNRS, UMR 5113), 2011. "Remittances and economic growth: what channels of transmission? (In French)," Cahiers du GREThA, Groupe de Recherche en Economie Théorique et Appliquée 2011-28, Groupe de Recherche en Economie Théorique et Appliquée.
  13. Dalia Hakura & Ralph Chami & Peter Montiel, 2009. "Remittances," IMF Working Papers, International Monetary Fund 09/91, International Monetary Fund.
  14. 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.

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