Title: Modelling the public moral hazard problem of international remittance inflows in Bangladesh

Authors: Muntasir Murshed; Syed Rashid Ali; Mohammad Haseeb; Solomon Prince Nathaniel

Addresses: School of Business and Economics, North South University, Dhaka, Bangladesh ' Department of Economics, University of Karachi, Pakistan ' Institute for Region and Urban-Rural Development, Wuhan University, Wuhan, 430072, Hubei Province, China ' Department of Economics, University of Lagos, Akoka, Nigeria; School of Foundation, Lagos State University, Badagry, Nigeria

Abstract: Although international remittances are expected to spawn welfares within the recipient economies, the public moral hazard problems associated with such inflows often trigger apprehensions. Against this backdrop, this paper aimed to evaluate the public spending responses to inward foreign remittances in Bangladesh. The results confirm that higher volumes of remittances reduce the overall level of public spending as well as public health expenditure in Bangladesh. In contrast, incoming remittances are found to persistently enhance public expenditure in the education sector. Moreover, rising income inequality, deteriorating democratic practices and poor governance in Bangladesh are found to aggravate the public moral hazard problems associated with the influx of international remittances.

Keywords: remittances; public moral hazard problem; public spending; income inequality; democracy; governance; Bangladesh.

DOI: 10.1504/IJSE.2021.114611

International Journal of Sustainable Economy, 2021 Vol.13 No.2, pp.166 - 196

Received: 08 Sep 2020
Accepted: 25 Oct 2020
Published online: 28 Apr 2021 *

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