Institutional Quality Effect on Remittances in the MENA Region

International worker’s remittances have increased over the years to become a main source of income for developing countries. Workers’ remittances have surpassed foreign direct investment and foreign aid. They proved to be particularly resilient during the latest global crisis, unlike other capital flows that fell sharply or even turned negative, especially for Middle East and North Africa (MENA) countries. Given the magnitude, and the stability of remittances, this paper aims to test the effects of institutional characteristics via the composite risk index on remittances inflows in MENA region. In order to deal with the possible endogeneity problem, a seemingly unrelated equation system" (SURE) proposed by Arnold Zellner, (1962) is used to estimate a model with endogenous variables for a sample of 15 MENA countries over the period 1984-2011. We highlight a negative relationship between remittances and the composite risk implying an increase of remittances when risk increases in the specific case of MENA. This result proves an altruistic motivation of the MENA migrant’s decision to remit.