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Is the Relationship Between Remittances and Political Institutions Monotonic? Evidence from Developing Countries
Author(s) -
Williams Kevin
Publication year - 2018
Publication title -
south african journal of economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.502
H-Index - 31
eISSN - 1813-6982
pISSN - 0038-2280
DOI - 10.1111/saje.12199
Subject(s) - developing country , incentive , politics , panel data , economics , democracy , demographic economics , development economics , economic growth , political science , market economy , econometrics , law
Remittances have become one of the most important sources of household income in developing countries, empowering recipients to be more politically independent. Using a dynamic estimator and panel data for 84 developing countries over the 1982–2011 period, this paper investigates the effect that remittances have on political institutions. Controlling for country and time fixed effects and using an exogenous source of variation to instrument remittances, the baseline results show that remittances start having a positive effect on democratic institutions when remittances reach 22% of GDP. This evidence suggests that remittances can influence the relationship between recipients and political elites, providing incentives for recipient households to hold their political representatives more accountable.