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Remittances and Institutions: Are Remittances a Curse?
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Author/Editor: |
Abdih, Yasser | Chami, Ralph | Dagher, Jihad | Montiel, Peter |
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February 1, 2008 |
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Electronic Access: |
Free Full Text (PDF file size is 376KB)
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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.
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Summary: This paper addresses the complex and overlooked relationship between the receipt of workers' remittances and institutional quality in the recipient country. Using a simple model, we show how an increase in remittance inflows can lead to deterioration of institutional quality - specifically, to an increase in the share of funds diverted by the government for its own purposes. Empirical testing of this proposition is complicated by the likelihood of reverse causality. In a cross section of 111 countries we document a negative impact of the ratio of remittance inflows to GDP on domestic institutional quality, even after controlling for potential reverse causality. We find that a higher ratio of remittances to GDP is associated with lower indices of control of corruption, government effectiveness, and rule of law.
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Series: |
Working Paper No. 08/29 |
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Subject(s): |
Working Paper |
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Author's keyword(s): |
Remittances
| Institutions
| Corruption
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Published: |
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February 1, 2008 |
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Format: |
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Paper |
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Stock No: |
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WPIEA2008029 |
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Pages: |
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31 |
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Price: |
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US$18.00
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