Are Immigrant Remittance Flows a Source of Capital for Development?

Samir Jahjah, Ralph Chami and Connel Fullenkamp

No 2003/189, IMF Working Papers from International Monetary Fund

Abstract: The role of remittances in development and economic growth is not well understood. This is partly because the literatures on the causes and effects of remittances remain separate. We develop a framework that links the motivation for remittances with their effect on economic activity. Because remittances take place under asymmetric information and economic uncertainty, there exists a significant moral hazard problem. The implication is that remittances have a negative effect on economic growth. We test this prediction using panel methods on a large sample of countries. The results indicate that remittances do have a negative effect on economic growth, which indicates that the moral hazard problem in remittances is severe.

Keywords: WP; worker remittance; economic growth; interest rate; remittances; altruism; asymmetric information; private income transfers; moral hazard; remittance transfer; remittance literature; remittance-determination equation; remittance determination; remittance arrangement; effects of remittance; remittance decision; remittance choice; remittance inflow; Migration; Income; Outward remittances; Middle East (search for similar items in EconPapers)
Pages: 47
Date: 2003-09-01
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Citations: View citations in EconPapers (394)

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Related works:
Journal Article: Are Immigrant Remittance Flows a Source of Capital for Development? (2005)
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