Why Remittances Are a Political Blessing and Not a Curse
Seungbin Park (University of Alabama), David H. Bearce (University of Colorado – Boulder)
Studies in Comparative International Development
This paper reconsiders the proposition that remittances act as a political curse by reducing the poor’s demand for economic redistribution. With a newer democratization model focused on the demand for income protection from the rising groups in society, remittances may instead function as a political blessing. Since remittances increase income not only for the usually middle-class citizens that receive them, but also for the merchant and working classes per the multiplier effect, remittances should increase the demand for political rights to protect the economic assets of these societal groups. Using an error correction model with both country and year fixed effects, it reports a significant positive relationship between the change in democracy and net remittance inflows as a share of GDP using three different operational measures for democracy. It also reports results consistent with the underlying causal argument, showing how remittances increase national income and societal economic freedom.