publication . Article . 2013

Remittances Deteriorate Governance

Faisal Z. Ahmed;
Open Access
  • Published: 01 Jan 2013 Journal: Review of Economics and Statistics, volume 95, pages 1,166-1,182 (issn: 0034-6535, eissn: 1530-9142, Copyright policy)
  • Publisher: MIT Press - Journals
Abstract
I use a natural experiment of oil-price-driven remittance flows to poor, non-oil-producing Muslim countries to demonstrate that remittances deteriorate the quality of governance, especially in countries with weak democratic institutions. The results indicate that a 1 standard deviation increase in remittances raises corruption by 1.5 index points (on a 6-point scale), which is equivalent to a [dollar]600 decrease in per capita GDP. Concomitantly, remittances may enable governments to reduce their delivery of public services (for example, health care, school enrollment). The results suggest that political institutions may mediate the potentially beneficial socioe...
Subjects
free text keywords: remittance flows, governance, Economics and Econometrics, Social Sciences (miscellaneous), jel:D73, jel:F24, jel:O16, jel:H42
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