THE POLITICAL & ECONOMIC EFFECTS OF REMITTANCES ON GOVERNMENT POLICY: A MEDIATIONAL ANALYSIS BY COUNTRY INCOME LEVEL

Abstract

Economic remittances have been seen to have a variety of political and economic effects on receiving countries. Taking these divergent findings into account, I propose that we zoom out and conceptualize government policy as a bundle of political and economic tools that governments can use in response to remittance income. Depending on the specific political-economic context of a given country, remittances may exert different pressures on the government. I argue that in middle/high-income remittance receiving countries, governments face a greater incentive to strengthen procedural democracy while mitigating prospects of redistribution to poorer individuals. On the other hand, I argue that lower income remittance receiving countries are not as likely to develop procedural democracy and more likely to favor redistributive welfare measures. To test my hypotheses, I run a series of OLS regressions mediated by country income level. I find mixed results indicating no statistically significant differentiation between the effect of remittances on procedural democracy or public government expenditure in low- and high-income contexts. I do, however, find broad trends that suggest some differences that support my overall hypotheses. I also conduct an individual country analysis of two remittance receiving African countries and find results that lend support to both of my hypotheses.