Do remittances improve political institutions? Evidence from Sub-Saharan Africa

- The effect of remittances on democratic institutions in Sub-Saharan Africa.
- Economic conditions in remittance-sending countries are used to instruments remittances.
- Dynamic panel estimation shows evidence that remittance flows improve democratic institutions.
- Poverty and education are channels linking the impact of remittances on democratic institutions.

Do remittances represent a significant positive determinant of democratic institutions in Sub-Saharan Africa? In this paper, we estimate the effect that remittances have on democratic institutions in Sub-Saharan Africa over the period 1975-2014. Using a 5-year non-overlapping panel sample and controlling for country and time fixed effects, we find that remittances are positively associated with democratic institutions. Our baseline system-GMM estimates indicate that a one standard deviation increase in remittance flows improves democratic institutions by around 0.32 standard deviations. Furthermore, we find that remittances improve democratic institutions by increasing schooling and reducing poverty.