Are Immigrant Remittance Flows a Source of Capital for Development

Author/Editor: Chami, Ralph ; Fullenkamp, Connel ; Jahjah, Samir
Publication Date: September 01, 2003
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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.
Series: Working Paper No. 03/189
Subject(s): Capital flows | Economic growth | Salary remittances

Author's Keyword(s): Remittances | altruism | asymmetric information | private income transfers | moral hazard | economic growth
Publication Date: September 01, 2003
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA1892003 Pages: 47
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