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Remittances Deteriorate Governance

Author(s): Ahmed, Faisal Z.

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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. © 2013 by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Publication Date: 28-Oct-2013
Citation: Ahmed, FZ. (2013). Remittances Deteriorate Governance. Review of Economics and Statistics, 95 (4), 1166 - 1182. doi:10.1162/REST_a_00336
DOI: doi:10.1162/REST_a_00336
ISSN: 0034-6535
EISSN: 1530-9142
Pages: 1166 - 1182
Type of Material: Journal Article
Journal/Proceeding Title: Review of Economics and Statistics
Version: Final published version. Article is made available in OAR by the publisher's permission or policy.

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