Duration of membership in the world trade organization and investment-oriented remittances inflows

This article examines the effect of the duration of the membership in the World Trade Organization (WTO) on investment-oriented remittances inflows (i.e., the portion of total remittances invested by remittance-receiving households in business activities). The analysis covers 120 countries over the period from 1996 to 2019, and employs the two-step system generalized method of moments estimator. It provides support for the hypothesis that by improving the stability and predictability of the business environment (i.e., by reducing tariffs volatility, trade uncertainty and economic uncertainty), the WTO membership provides strong incentives for remittance-receiving households to invest a fraction of their total remittances in business activities. This positive effect of the membership duration on investment-oriented remittances inflows appears to stronger for less developed countries. Additionally, longstanding WTO Members enjoy higher investment-oriented remittances inflows when they have large populations (a proxy for larger amounts of total remittances inflows), experience high trade volumes, a higher economic growth performance, and receive higher development aid inflows. Incidentally, the duration of WTO membership is positively and significantly associated with total remittances inflows. These findings complement previous works that highlighted the relevance of the WTO in promoting the development of the private sector in its member states (including developing members and the poorest among them).