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1. Introduction
The global economy has witnessed a substantial growth in international remittance flows since the early 2000s. The estimated value of global remittances has increased nearly six-fold from $100 billion in 2000 to $592 billion in 2014 (Ratha et al., 2016). As a result of the sustained increase in outward migration, remittances have emerged as one of the largest sources of financial inflows to many developing countries. Due to persistency in migrants’ desire to remit, as seen during and in the aftermath of the global financial crisis, remittances have become more resilient than other types of financial flows to these countries (World Bank, 2011). A large body of research on remittances has documented their robust effects on investment in physical and human capital (Lucas, 1987; Durand, Parrado and Massey, 1996; Yang, 2005), small business and entrepreneurship (Massey and Parrado, 1994; Dustmann and Kirchkamp, 2002; McCormick and Wahba, 2004; Woodruff and Zenteno, 2007; Vaaler, 2011), and financial development (Giuliano and Ruiz-Arranz, 2009; Gupta et al., 2009; Aggarwal et al., 2011; Chowdhury, 2011; Demirguc-Kunt et al., 2011).
From the standpoint of entrepreneurship development, two questions surrounding remittances arise which are of broader economic interest for the recipient country: can these external resource inflows serve as a financial stimulus for domestic entrepreneurs? and if so, how such stimulus shapes the political will to enact business regulatory reform? Some embedded but less visible characteristics such as the regulatory system, bureaucratic efficiency, and the nature of business governance play a critical role in fostering domestic entrepreneurship (Doing Business, 2016). Improving the regulatory environment for business can make a difference in part because it mitigates the risks for entrepreneurs, new and experienced alike. The countries with lower barriers to entry generally see higher formal sector participation and a greater entry rate of new businesses (Klapper et al., 2006; Ciccone and Papaioannou, 2007; Kaplan et al., 2011).
Political economy research has recognized that the inflow of external financial resources can help reforms get launched and sustained by alleviating the costs of reform; and the policymakers who have courageously pursued market-oriented reforms are considered as heroes of the economics profession (see Harberger, 1993; Rodrik, 1996; Malesky, 2008). When more businesses enter the formal sector, the government...