Do Remittances Lead to a Public Moral Hazard in Developing Countries? An Empirical Investigation
This article tests the hypothesis that in a context of ‘bad governance’, remittance inflows strongly reduce public spending on education and health in receiving countries; a phenomenon called the ‘public moral hazard problem’. Using a large sample of 86 developing countries over the period 1996--2007, and after factoring in the endogeneity of remittances, the results suggest a negative impact of remittances on public spending on education and health, when governance is bad in remittance-dependent economies.
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Volume (Year): 48 (2011)
Issue (Month): 8 (May)
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