Workers' Remittances and Business Ownership in the Dominican Republic

Susan Pozo, Western Michigan University
Catalina Amuedo-Dorantes, San Diego State University

Substantial controversy exists regarding whether remittances benefit or hurt recipient nations. We contribute to the scorecard on international remittances by exploring one under-researched area-the impacts of these flows on business ownership and their ability to loosen financial constraints. Our data come from the Dominican surveys of the Latin American Migration Project. We model the household's likelihood of owning a business as a function of remittance receipt and various household head, household, and location characteristics. We take into account the possibility of reverse causality between households' business ownership and remittance receipt since migrants' remitting patterns may vary with their intentions of laying claim to family assets, including family businesses. Accordingly, using a system of simultaneous probits of the likelihood of household business ownership and remittance receipt, we test the hypothesis that workers' remittances contribute to economic development by facilitating entrepreneurial activity on account of greater availability of financial support.