Are Immigrant Remittance Flows a Source of Capital for Development?

By Samir Jahjah, Ralph Chami, Connel Fullenkamp

September 1, 2003

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Samir Jahjah, Ralph Chami, and Connel Fullenkamp. Are Immigrant Remittance Flows a Source of Capital for Development?, (USA: International Monetary Fund, 2003) accessed September 20, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

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.

Subject: Balance of payments, Financial sector policy and analysis, Income, Migration, Moral hazard, National accounts, Outward remittances, Population and demographics, Remittances

Keywords: Altruism, Asymmetric information, Economic growth, Effects of remittance, Income, Interest rate, Middle East, Migration, Moral hazard, Outward remittances, Private income transfers, Remittance arrangement, Remittance choice, Remittance decision, Remittance determination, Remittance inflow, Remittance literature, Remittance transfer, Remittance-determination equation, Remittances, Worker remittance, WP

Publication Details

Pages:

47
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2003/189
Stock No:

WPIEA1892003
ISBN:

9781451859638
ISSN:

1018-5941

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