Migration, Remittances and the Fiscal Contract

• In Event: Politics of Pre-Distribution and Redistribution

Abstract

How does the receipt of remittances shape the fiscal contract in developing countries? We argue that receiving remittances weakens individual incentives to support a fiscal contract of taxation in return for public services. Individuals (agree to) pay taxes according to the quantity and quality of goods and services they receive from the state. Those who receive remittances can use the money sent by friends or family overseas to obtain public services like health and education on the private market instead of through tax-funded government schemes. Using survey data from Africa and Latin America, we find that those who receive money from abroad are less supportive of taxation and more likely to approve of (and practice) tax evasion and avoidance. This finding is robust across regions, and to controlling for a range of variables, including emigration intentions, and to matching individuals on observable characteristics.

Authors

• Barry Maydom, Birkbeck College, University of London

• Ana Isabel Lopez Garcia, Maastricht University