Are Immigrant Remittance Flows a Source of Capital for Development?
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Summary:
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.
Series:
Working Paper No. 2003/189
Subject:
Balance of payments Financial sector policy and analysis Income Migration Moral hazard National accounts Outward remittances Population and demographics Remittances
English
Publication Date:
September 1, 2003
ISBN/ISSN:
9781451859638/1018-5941
Stock No:
WPIEA1892003
Pages:
47
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