Internal remittances and household expenditure behavior
Date
2009-10-22
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Abstract
As the receipt of internal remittances has been closely associated with households belonging to the lowest income groups, a study on the potential effect of these remittances on spending behavior has long been overdue. Early studies conclude that remittances encourage unscrupulous consumption. However, recent empirical fundings tend to support a more optimistic view. To extend this debate, this paper explored the following problems: 1. Does the receipt of internal remittances affect household expenditure behavior?, 2. What is its impact on the household's propensity to consume or invest? and 3. Are the spending patterns of households receiving internal remittances "qualitatively different" from households receiving no remittances? To address the first and second questions, regression analysis was used. To address the third, marginal budget shares and expenditure elasticities were calculated. The fundings reveal that although there is no evidence that the receipt of internal remittances encourages investment, there is, at least, strong evidence that these are not "unscrupulously consumed". An analysis of the marginal budget shares for each remittance group reveals that the behavior of households receiving internal remittances is "qualitatively different" from households receiving no remittances, i.e., qualities or factors that affect marginal spending vary between goods and across remittance groups. On the whole, after controlling for total expenditures, internal recipients allocate more, at the margin, on housing, education and health and less on clothing and durable furniture, tobacco and alcohol than non-remittance recipients at the lowest expenditure levels.
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Keywords
Remittances, Internal remittances, Household expenditure, Household behaviour, Expenditure behavior