Do Foreign Remittances Fuel or Fight Against Corruption? Evidence From Developing Countries

ABSTRACT This study re‐examines whether remittances act as a curse by deteriorating corruption in recipient developing countries. Analyzing extensive annual panel data, the study challenges the prevailing view by showing that remittances significantly improve corruption control. This positive association remains robust after accounting for country and time fixed‐effects, potential endogeneity, and Nickell bias, and holds across various estimation techniques—including fixed‐effects, panel IV, and dynamic system GMM—as well as alternative remittance measures. The study also finds that the impact of remittances weakens in countries with higher income and stronger democracy, but remains effective in those with income and democracy levels below certain high thresholds. Moreover, beyond the direct effect, remittances reduce corruption broadly through fostering economic development and democratic progress. These findings highlight the transformative potential of remittances in strengthening governance and combating corruption in developing countries.