Does democracy stimulate remittances?

Abstract

AbstractThe phenomenon of remittances is the subject of intense debate among politicians, researchers, and academics. This is because it touches on a multitude of human, economic, and financial aspects. This paper empirically investigates the empirical relationship between political systems and remittances in order to understand how changes in political systems in the home and host countries affect remittances. By using the gravity model of bilateral remittance flows for 101 sending countries and 92 developing receiving countries for the period 2010–2017. Findings indicate that strengthening democratic processes in countries of origin leads to more remittances. This result is most pronounced in low‐income countries. However, democracy in host countries has a negative effect on remittances. These findings are robust to the different techniques and specifications used. Strengthening democratic institutions in low‐income countries can attract more financial flows.