Are Immigrant Remittance Flows a Source of Capital for Development?

48 Pages Posted: 6 Feb 2006  

Ralph Chami

International Monetary Fund (IMF)

Connel Fullenkamp

Duke University - Department of Economics

Samir Jahjah

International Monetary Fund - INS

Date Written: September 2003

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: remittances, altruism, asymmetric information, private income transfers, moral hazard, economic growth

JEL Classification: D1, D64, D82, F2, F22, O15

Suggested Citation

Chami, Ralph and Fullenkamp, Connel and Jahjah, Samir, Are Immigrant Remittance Flows a Source of Capital for Development? (September 2003). IMF Working Paper, Vol. , pp. 1-48, 2003. Available at SSRN: https://ssrn.com/abstract=880292

Ralph Chami (Contact Author)

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-6039 (Phone)
202-623-6068 (Fax)

Connel Fullenkamp

Duke University - Department of Economics ( email )

213 Social Sciences Building
Box 90097
Durham, NC 27708-0204
United States
(919) 660-1800 (Phone)

Samir Jahjah

International Monetary Fund - INS ( email )

700 19th Street NW
Washington, DC 20431
United States
202-623-3682 (Phone)
202-589-6823 (Fax)

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