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Are Immigrant Remittance Flows a Source of Capital for Development

Author/Editor: Chami, Ralph | Fullenkamp, Connel | Jahjah, Samir
Authorized for Distribution: September 1, 2003
Electronic Access: Free Full Text (PDF file size is 1,415KB)
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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.
 
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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
 
English  
    Published:   September 1, 2003        
    ISBN/ISSN:   1934-7073   Format:   Paper
    Stock No:   WPIEA1892003   Pages:   47
    Price:   US$15.00 (Academic Rate: US$15.00 )
       
     
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