Bilateral Remittance Flows, Institutional Quality and Individual Happiness: Macro and Micro Level Analysis

38 Pages Posted: 23 Mar 2010 Last revised: 7 Jun 2010

See all articles by Faruk Balli

Faruk Balli

Massey University - School of Economics and Finance; Suleyman Sah University - Department of Business Administration

Hatice Ozer Balli

Massey University

Rukmani Gounder

Massey University

Cahit Guven

Deakin University - School of Accounting, Economics and Finance

Date Written: March 11, 2010

Abstract

Migrants sending money home are an important part of millions of people around the world where remittances play a direct role on the livelihoods of receiving households. In the country level analysis, this paper explores the determinants of bilateral remittance flows using a novel dataset published by Ratha and Shaw(2005). Bilateral remittance flows are modeled with gravity equation variables first, and we find highly dependable results. New to the literature, we also explore that cultural differences, proxied by cross-religion dummies, are important in explaining bilateral remittance flows between low income countries. More importantly, this paper attempts to answer whether institutional quality and life satisfaction levels of the sending country play a role in the patterns of bilateral remittances flows. The results indicate that various institutional quality measurements including government functioning, freedom of speech, civil rights, individual rights and rule of law are highly significant. In particular, the quality of institutions of sending country are found highly important in modeling the patterns of the remittance flows between high income countries. In addition to the quality of institutions, life satisfaction levels of sending countries are highly significant in explaining the bilateral remittance flows. In the individual level analysis, using German Socio-Economic panel, GSOEP, we find that immigrants are sending less money back home when they fell like more German and when they are dwelling owners. Just like in macro level findings, immigrants send more money back home when they are more happy in the country they are residing, and they trust more to the institutions of the country of origin.

Keywords: Bilateral remittance flows, Institutional Quality, Happiness, Individual Level Remittance data, Gravity equations

JEL Classification: E36, E41

Suggested Citation

Balli, Faruk and Ozer-Balli, Hatice and Gounder, Rukmani and Guven, Cahit, Bilateral Remittance Flows, Institutional Quality and Individual Happiness: Macro and Micro Level Analysis (March 11, 2010). Available at SSRN: https://ssrn.com/abstract=1569141 or http://dx.doi.org/10.2139/ssrn.1569141

Faruk Balli (Contact Author)

Massey University - School of Economics and Finance ( email )

Private Bag 11-222
Palmerston North, 30974
New Zealand

Suleyman Sah University - Department of Business Administration ( email )

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Istanbul, 34865
Turkey

Hatice Ozer-Balli

Massey University ( email )

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New Zealand

Rukmani Gounder

Massey University ( email )

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Palmerston North, Manawatu 4442
New Zealand

Cahit Guven

Deakin University - School of Accounting, Economics and Finance ( email )

221 Burwood Highway
Burwood, Victoria 3215
Australia

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