Remittances and Institutions: Are Remittances a Curse?

By Jihad C. Dagher, R. Chami, Peter J. Montiel, Yasser Abdih. Social Science Research Network, 2008

335 citations recorded by the source corpus.

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.

Subfields: Sociology and Political Science

View Paper: https://www.semanticscholar.org/paper/4e6e8781729a7fdf91e47356be5520993222a6f4

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In Sociology and Political Science

Citations in the corpus

Remittances and Household Consumption Instability in Developing Countries (2011, background): “High levels of remittance-to-GDP may actually lead to higher levels of corruption (Abdih et al., 2008).”
Do Workers' Remittances Promote Economic Growth? (2009, background): “Recently, Abdih et al (2008) find evidence that remittance flows adversely impact the quality of institutions in recipient countries.”