This paper uses panel data on international remittances covering up to 113 countries over the period 1970 to 1998 to analyze the impact of remittances on economic development. Using instrumental variables and a variety of fixed-effects models the authors find that international remittances have a negative and significant effect on economic growth (GDP growth). On the basis of this finding, the authors conclude that remittances do not serve as capital for economic development, but rather as a type of compensation for poor economic performance.
