Modelling the public moral hazard problem of international remittance inflows in Bangladesh

Muntasir Murshed, Syed Rashid Ali, Mohammad Haseeb and Solomon Prince Nathaniel

International Journal of Sustainable Economy, 2021, vol. 13, issue 2, 166-196

Abstract: Although international remittances are expected to spawn welfares within the recipient economies, the public moral hazard problems associated with such inflows often trigger apprehensions. Against this backdrop, this paper aimed to evaluate the public spending responses to inward foreign remittances in Bangladesh. The results confirm that higher volumes of remittances reduce the overall level of public spending as well as public health expenditure in Bangladesh. In contrast, incoming remittances are found to persistently enhance public expenditure in the education sector. Moreover, rising income inequality, deteriorating democratic practices and poor governance in Bangladesh are found to aggravate the public moral hazard problems associated with the influx of international remittances.

Keywords: remittances; public moral hazard problem; public spending; income inequality; democracy; governance; Bangladesh. (search for similar items in EconPapers)
Date: 2021
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijsuse:v:13:y:2021:i:2:p:166-196

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