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Remittances and Social Spending
David Doyle has an article, “Remittances and Social Spending," in the current edition of the American Political Science Review.
The paper focuses on the effect of remittances on welfare provision in Latin America. Remittances are a significant source of foreign exchange for developing economies.
The paper argues that remittances, due to their compensation and insurance functions, will increase the general income level and economic security of recipients, thereby reducing their perceived income risk. Over time, this will dampen demand from recipients for government taxation and social insurance. Therefore, increases in income remitted to an economy result in reduced levels of social welfare transfers at the macro-level. This dynamic can help us to understand spending patterns in developing democracies, and the absence of demand for social security transfers in countries with high levels of inequality and economic insecurity.