The Resource Curse Reversed? Remittances and Corruption in Mexico1

Abstract

Do remittances increase corruption in recipient states? Previous research suggests that remittances allow governments to maintain policies that create corrupt state–society relations. In contrast, this paper argues that remittances mitigate corruption by increasing government accountability and providing other incentives to reform. Using data from Mexico in 2001–2007, this study shows that corruption trended downward in states receiving larger remittance sums, after controlling for political competition, divided government, and market openness. The results are robust to instrumental variable analysis testing for potential endogeneity between corruption and migration. These findings bring attention to remittances as an exogenous resource for reform-minded groups and suggest that they may operate as the converse of the resource curse.