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.