From abroad to the ballot: remittances and political institutions

Abstract

This paper investigates the impact of remittances from democratic countries on the political institutions of recipient nations. We argue that the democratic origin of remittances, rather than their aggregate level, is what matters for institutional outcomes. To test this proposition, we analyse a sample of 156 countries from 1970 to 2023, using a novel dataset that distinguishes between remittances from democratic and autocratic source countries. Our instrumental-variable strategy uses common-language exposure to democratic source countries, weighted by inverse bilateral distance and interacted with global trade openness. Results from our analysis and several robustness tests indicate that remittances from democratic countries significantly enhance democratic institutions. While the analysis is global in scope, the findings are particularly relevant to debates on political change in autocratic and weakly democratic regimes.