Remittances, Regime Type, and Government Spending Priorities

Previous work suggests that remittances enable governments to reduce spending on public services and divert resources to serve their own interests. We argue this need not occur. Building on recent work which shows that the impact of remittances is contingent on the domestic environment in remittance-receiving countries, we hypothesize that (1) remittances are more likely to increase government spending on public services in democracies than in autocracies and (2) remittances are more likely to finance activities that deter political competition in autocracies than in democracies. Using a sample of 105 developing countries from 1985 through 2008, we find strong support for our hypotheses when examining the impact of remittances on public education, health, and military spending. We also provide suggestive evidence for the mechanism underpinning our results: micro-level evidence on remittance recipients’ preferences and political engagement.