Remittances, institutions and economic growth: A closer look at some proxies for institutions

Abstract

This paper re-examines the relationship between remittances and economic growth by giving a closer look at the role of institutions. Using data on 55 developing countries over the period 1991-2011 and estimates from empirical models that take care of the heterogeneity among countries as well as the potential endogeneity of remittances and other control variables, we find the link between remittances and growth to be fragile. We also document that the impact of institutions on the relationship between remittances and growth depends on how institutions are measured. We highlight some points related to certain aspects of institutions that are believed to have impact on remittances and measurement issues surrounding both remittances and institutions.