preprints.org > business, economics and management > accounting and taxation > doi: 10.20944/preprints202105.0464.v1

Preprint Article Version 1 Preserved in Portico This version is not peer-reviewed

Version 1 : Received: 19 May 2021 / Approved: 20 May 2021 / Online: 20 May 2021 (09:41:25 CEST)

This paper examines how remittances contribute to the democratisation process in Bangladesh. The endogeneity issue between remittances and democracy is tackled by employing the Structural VAR (SVAR) approach. It is found that while remittances respond to innovations in the macro-political variables, remittances also have important impact on these variables. Our results build a synergy between two opposing findings in the politics literature where on one hand remittances flows stabilise autocracies, while on the other hand they foster the prospect for democratisation. In particular, we demonstrate that a shock in remittances flows will have a negative but transitory impact on democracy. Initially there will be a bout of autocratic episodes which will be eventually eliminated and democracy will be restored to its original level in three to five years. However, using an alternative measure for democracy with the aid of principal-component analysis, we find that after the fifth year following a shock in remittances flows, a small but positive permanent effect on democracy is observable that do not revert to zero at end of the ten period horizon.

Remittances; democrac; election process; Bangladesh; labour migrants

Business, Economics and Management, Accounting and Taxation

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