Cover IMF Working Papers
Remittances and Institutions: Are Remittances a Curse?
Author: Jihad Dagher, Mr. Ralph Chami, Mr. Peter J Montiel, and Mr. Yasser Abdih
Series:
IMF Working Papers
Volume/Issue:
Volume 2008: Issue 029
Language:
English
Publication Date:
01 Feb 2008
DOI:
https://doi.org/10.5089/9781451868913.001
ISBN:
9781451868913
ISSN:
1018-5941
Pages:
31
Keywords:
WP; private income
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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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.
Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund