Remittances deteriorate governance

Faisal Z. Ahmed

Research output: Contribution to journalArticlepeer-review

59 Scopus citations

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 $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 socioeconomic effects of remittance inflows.

Original languageEnglish (US)
Pages (from-to)1166-1182
Number of pages17
JournalReview of Economics and Statistics
Volume95
Issue number4
DOIs
StatePublished - 2013

All Science Journal Classification (ASJC) codes

  • Social Sciences (miscellaneous)
  • Economics and Econometrics

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