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Are Immigrant Remittance Flows a Source of Capital for Development?

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  • Mr. Samir Jahjah
  • Mr. Ralph Chami
  • Connel Fullenkamp

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.

Suggested Citation

  • Mr. Samir Jahjah & Mr. Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development?," IMF Working Papers 2003/189, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2003/189
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    References listed on IDEAS

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    More about this item

    Keywords

    WP; worker remittance; economic growth; interest rate; remittances; altruism; asymmetric information; private income transfers; moral hazard; remittance transfer; remittance literature; remittance-determination equation; remittance determination; remittance arrangement; effects of remittance; remittance decision; remittance choice; remittance inflow; Migration; Income; Outward remittances; Middle East;
    All these keywords.

    JEL classification:

    • D64 - Microeconomics - - Welfare Economics - - - Altruism; Philanthropy; Intergenerational Transfers
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration

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