Domestic Institutions and the Supply and Demand of Remittances



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Many countries are dependent upon capital flows for their balance of payments accounts. Sources of expenditures include foreign direct investment (FDI), portfolio investment (PI) and remittances. While the determinants of FDI and PI have been extensively analyzed, the analyses of remittance flows from host to home countries are largely lacking and wide-ranging. Factors predominantly not considered are domestic institutions which support or encourage international remittance exchange. Nations routinely desire to control international immigration and capital movement. Consequently they adopt domestic policies which create and enforce institutions that manage both capital and labor mobility across borders. Additionally, researchers commonly neglect to consider the impact of both the supply and demand factors simultaneously, or in other words, the domestic condition (home and host) which both push and pull migrants to migrate and remit. Further, given the non-dyadic nature of the data, there arises a need to "regionalize" the data. To test the effects of variations in immigration institutional attributes, I employ a pooled data set of approximately 104 nations from 1990 to 2004. Controlling for existing explanations and regional influences, I find that domestic institutions have a significant impact on the ability of an individual to migrate to a host country and to eventually remit back to their country of origin.