Remittance receipts and allocation: a study of three African countries

Remittances may influence household expenditures, poverty rates, development and investments in the receiving country. Using World Bank survey data from Ethiopia, Uganda and Kenya, the influence of remitters’ and recipients’ characteristics on remittance amounts and allocation is examined. Effects of the remitter–receiver characteristics on remittance amounts are generally similar between countries. Such similarities imply a potential similar effect of policies in these countries. Age, household income, frequency of communication, family relations with remitter and country the recipient resided in influence remittance allocation. Recipients in Ethiopia and Uganda are more likely to allocate remittance towards savings than those in Kenya.     

Do remittances and foreign aid augment the gross savings: Bangladesh,India and Philippines perspective?

Savings is considered to be a principal determinant to achieve long-run economic growth. Remittances and foreign aid are two important foreign capital inflows to meet the savings deficiency of developing nations. The objective of this study is to investigate the long-run impact of remittance to stimulate savings in remittance recipient countries. This paper contributes to the macroeconomic impact of remittance through a comparative study on Bangladesh, India and Philippines that positioned among the top ten largest remittance recipient countries from 2008 and onwards. The analysis makes use of an annual time series data over the period of 1980–2015. The Johansen cointegration test suggested long-run cointegrating relationship of remittance and foreign aid on gross savings. The test result suggests positive effect of remittances on gross savings for Bangladesh and Philippines although an insignificant negative effect for India. However, foreign aid has significant negative long-run impact in all the three cases. Government policy should focus on leveraging remittance flows to facilitate savings and investment for capital accumulation.     

Remittances and financial development: empirical evidence from heterogeneous panel of countries

Remittances are the second largest source of external finance after foreign direct investment in the developing economies. In this study, we analyse the role of incoming remittances on financial development for 57 highest remittance recipient economies. A long run equilibrium relationship is established between remittances and three alternative indicators of financial development. Estimates from the dynamic system-generalized method of moments reflect lower elasticity values for developing countries compared to the developed ones. Our findings are robust across countries, and highlight the necessity for strengthening institutional set-ups to increase the inflow of remittances, which will enhance financial development across countries. The role of foreign direct investment is found to be significant in most cases.     

Remittances and Business Cycles: Comparison of South Asian Countries

ABSTRACT

South Asia is one of the world's principal remittance-receiving regions. This study examines the home and host business cycles of migrant remittance flows to the region. Employing the Structural Vector Autoregression (SVAR) technique, the remittance behaviour of the region's four main countries is compared. Remittances to India and Pakistan show a mainly acyclical behaviour with respect to the output of the four host regions, and a countercyclical behaviour with respect to home output. In contrast, remittances to the two smaller economies of Bangladesh and Sri Lanka are found to be mainly procyclical. The study shows that the macroeconomic remittance behaviour varies with respect to the importance of remittance flows in the home economy. Moreover, remittance behaviour seems to respond more to home economy specificities than to those of the different regions that host the migrants from the developing countries.     

Effects of remittances on financial inclusion gender gap in developing countries

Remittances have a wide range of benefits to households and the economy at large. Evidence show that women are the major recipients of remittances in developing countries, consequently this may have the potential of reducing the gender gap in economic outcomes. This study examines the impact of remittances on gender gap in financial inclusion in developing countries. The dataset for the study was built from multiple sources. Based on data availability, the study covers 102 developing countries for three years, namely 2011, 2014 and 2017. The study employs fixed effects instrumental variable technique using the economic conditions of the top five remittance sending countries (proxied by their GDP per capita and employment rate) as instruments. For robustness purpose different measurements of remittances are used in the analysis. Though the study does not provide evidence that remittances impact the overall inequality in access to financial services, the results show that remittances significantly reduce the gender gap in financial inclusion in developing countries. Based on these findings, the study makes appropriate policy recommendations.     

Remittances and incumbency: Theory and evidence

By raising household income, remittances lower the marginal utility of targeted electoral transfers, thus weakening the efficacy of vote buying. Yet, remittances make individuals wealthier and believe the national economy is performing well, which is positively attributed to the incumbent. Building on these insights, I show that the confluence of these divergent channels generate a surprising result that at increasingly higher levels of dissatisfaction with the incumbent, a remittance recipient is more likely to vote for the incumbent than a non‐remittance recipient. These predictions and their underlying mechanisms are substantiated across 18 Latin American countries.     

Remittances and investment nexus in Bangladesh: an ARDL bounds testing approach

Bangladesh is the 8th largest remittance recipient country in the world and one of the heavily dependent (11 % of GDP) countries of remittances. Despite its importance in policy making in developing countries like Bangladesh, there is absence of any study regarding the effect of remittances on the level of investment. In an attempt to fill the gap, we examine the cointegrating property and stability of the relationship among these variables using the ARDL bounds testing approach combined with CUSUM and CUSUMSQ tests. Our findings show that both remittances and trade openness positively and significantly influence the level of investment in Bangladesh, meaning that contrary to most conclusions found in the literature, migrant remittances in developing countries are not entirely spent in basic consumption needs. We also find that foreign aid has very little and insignificant impact on investment. Finally, we find long-run unidirectional causal relationship running from remittances to investment indicating that favorable policies to increase the flow of remittance will promote investment in Bangladesh.     

Impact of remittances on male and female labor force participation patterns in Africa: Quasi‐experimental evidence from Ghana

In this paper, we examine how remittances, an outcome of labor mobility, affect labor market activities in Ghana using detailed household and individual‐level data. This is important, considering the extensive literature that has documented the remittance–poverty reduction nexus. First, we find a strong negative association between household remittance‐receiving status and individual labor supply decisions using instrumental variable estimation techniques. Second, we find the depressing effect of remittances on labor supply decisions to be much stronger in rural areas. Rural women who reside in remittance‐receiving households are less likely to be in the labor force compared with those who do not reside in such households. Remittances have very little impact on labor supply decisions in urban areas. Our findings support that remittances can exacerbate long‐term poverty reduction in rural areas through lower labor force participation, and as such rural‐based and gender‐based interventions may be needed to help redirect remittance income.     

Labour effects of foreign and domestic remittances – evidence from Pakistan

Remittances are playing an increasingly important role in the economies of developing countries. In this paper, we study the effects of these flows on Pakistan’s labour market. We employ the 2007–2008 Household Integrated Economic Survey and Probit as well as Propensity Score Matching techniques to examine the impact on labour participation, quantity of work and activities of working as well as non-active members of remittance-receiving households. We find that both foreign and domestic remittances tend to lower labour supply of the recipient households. This impact is higher among women and among the young. The impact is more pronounced in the rural areas. In addition, foreign remittances increase the likelihood of household members attending middle school. We also examine the quantity of labour supplied by the remittance-recipient households. Results show little difference in the number of months and days worked between the households receiving and not receiving remittances. Furthermore, we find that the likelihood of being self-employed and cultivating one’s own land is higher among remittance recipients. In sum, our analysis highlights a higher role of foreign remittances in the labour market as compared to internal remittances.     

Can remittances buy peace?

This paper offers new empirical evidence on the effects of remittance flows on conflict incidence, onset, and duration in recipient countries. It improves on previous studies by controlling for unobserved heterogeneity among remittance recipient countries, serial correlation of conflict, and the possibility of conflict being endogenous to remittances. To motivate the empirical findings, a micro‐founded model of conflict is developed. The model shows that wealth transfers (such as remittances) can raise the opportunity cost of participation in conflicts which can lead to a reduction in both the number of rebels and the force used by the government forces.     

Remittances and return migration

This paper utilizes survey data of return migrants to analyze the determinants of remittances sent while the migrants were abroad. We approach our research question from the perspective of three sending countries in the Maghreb, namely Algeria, Morocco, and Tunisia. We investigate the remittance behavior using the migrants’ conditions before migration as well as during the migration experience. Using a two‐part model, we show that the decision to remit and the amount remitted depend on a combination of different migrant characteristics and reasons for migration as well as the form of migration. More importantly, we also consider if the remittance behavior is dependent on the type of return: “decided” or “compelled.” We show that the two groups have different incentives to remit, which can help explain the link between type of migrants and their remittance behavior.     

Macroeconomic impacts of remittances in Bangladesh: The role of reverse flows

Das and Serieux (2010; 2015) and Serieux (2011) used the term “reverse flows” to define the part of external resources that is not domestically absorbed; instead used to finance debt obligations, capital flight, and accumulate reserves. While there is a vast literature on the growth and development impact of remittances in developing countries, the existing empirical literature has mostly ignored the potential diversion of remittances to reverse flows. This paper bridges the gap in the literature by estimating the reverse flows in the case of Bangladesh, which is one of the top remittance recipient countries in the world. The data set runs from 1976 to 2015. Econometric results obtained by employing the Autoregressive Distributed Lag (ARDL) approach show that almost 13–14% of remittances (as the ratio of gross domestic product, GDP) are diverted to finance reverse flows. In other words, the effects of remittances (as the ratio of GDP) on consumption and investment rates are no more than 86–87%. Therefore, the underlying assumption made in the existing literature that all remittances are used to increase consumption and/or investment overstates the impact of this external resource flow in Bangladesh. Findings from this study have important policy implications not only for Bangladesh but for other remittance recipient developing countries. Our findings will help the government to design policies to ensure the optimum allocation of remittances in the domestic economy.     

Remittances, schooling, and child labor in Mexico

This paper studies the effects of remittances from the U.S. on child labor and school attendance in recipient Mexican households. We identify these effects using the impact of the 2008-2009 U.S. recession on remittance receipts. The methodology employed is a differences-in-differences strategy that compares households that were remittance recipients before the crisis with never-recipient households. To avoid possible selection problems, we instrument for membership in the remittance recipient group. We find that the negative shock on remittance receipts caused a significant increase in child labor and a significant reduction of school attendance.     

Remittances and misery index in Turkey: is there a link?

This study tests the long run relationship between remittances and misery index in Turkey over the 1975–2011 period, using bounds testing approach. The results indicate that remittances and misery index are co-integrated. The misery index appears to have positive impact on remittance inflows in both short and long run, supporting altruism theory in remittance sending behaviour in Turkey.     

GROWTH AND WELFARE EFFECTS OF WORLD MIGRATION

Using a two‐bloc endogenous growth model calibrated to two generic sending and receiving countries of equal size, we assess the growth and welfare impact of world migration flows of different skill compositions. The sending country (East) has a lower total factor productivity and a lower endowment of skilled labour. Migration can induce two growth‐enhancing effects: an efficiency effect from the more efficient use of labour in the receiving country (West) and a sectoral reallocation effect from a fall in the host country skilled–unskilled wage rates. Despite growth gains, there are both winners (migrants, the representative Western non‐migrant household) and losers (the representative Eastern household remaining). Remittances can see the latter group joining the winners.     

How does financial development influence the impact of remittances on growth volatility?

This paper empirically examines how financial development influences the impact of remittances on GDP growth volatility. This empirical study is conducted using the panel smooth transition regression (PSTR) approach. The results show that the impact of remittances on GDP growth volatility is nonlinear and changes over time and across countries in function of financial development. More precisely, a high level of financial development helps remittances to have a high stabilizing impact. Therefore, public authorities in remittance recipient countries might implement policies that promote the financial sector in order to allow a high stabilizing impact of remittances.     

Remittances and Household Expenditures on Education in Ghana's Northern Region: Why Gender Matters

Studies of the impact of migrant remittances on receiving households assume that these households act as a unit in receiving remittances and making decisions about their use. Thus, many of these studies use the gender of the household head as a key control variable. This study questions this assumption, using original qualitative and quantitative data on rural–urban migration of women in Ghana to show that gendered social norms of household provisioning influence the intrahousehold flow of remittances. Regression results indicate that migrant women are more likely to send remittances to other women, creating female-centered networks of remittance flows even within male-headed households. The implications of this for intrahousehold resource allocation are explored through an analysis of the impact of the gender of the remitter and recipient on education expenditure. The results show that regardless of the gender of the household head, households in which women are the primary recipient of remittances spend more than twice as much on education as households in which men are the primary recipient.     

Does German Development Aid Promote German Exports?

Abstract. This paper uses a static and dynamic gravity model of trade to investigate the link between German development aid and exports from Germany to the recipient countries. The findings indicate that, in the long run, German aid is associated with an increase in exports of goods that is larger than the aid flow, with a point estimate of 140% of the aid given. In addition, the evolution of the estimated coefficients over time shows an effect that is consistently positive but that oscillates over time. Interestingly, after a decrease in the 1990s, the estimated coefficients of the effect of aid on trade show a steady increase in the period between 2001 and 2005. The paper distinguishes among recipient countries and finds that the return on aid measured by German exports is higher for aid to countries considered 'strategic aid recipients' by the German government. We also find some evidence that aid given by other EU members reduces German exports.     

Optimum currency area theory: evidence from post-Soviet countries and implications for Eurasian Economic Union

In this article the theory of optimum currency area is applied to post-Soviet and other selected countries. The study finds smaller exchange rate variability when the economies are closely linked by bilateral trade, are subject to similar shocks both on aggregate and at the industry level, have similar inflation rates, are open and smaller in economic size, and have higher labour migration as proxied by remittance flows. The estimation results also substantiate that the US dollar plays a dominant role as an anchor currency. Next, the study shows that economic fundamentals suggest limited prospects of a common currency for post-Soviet countries, particularly for the Eurasian Economic Union (EAEU). It is also found that Moldova, among the post-Soviet countries, better approximates an optimum currency area with Russia. Further, when the government debt-to-GDP ratio is taken into account, only Kazakhstan from the EAEU member countries stands out as having positive prospects for forming a common currency area with Russia.     

Oil prices,growth, and remittance outflows from the Gulf Cooperation Council

How does a decline in oil prices and its impacts on growth affect remittance outflows from the Gulf Cooperation Council (GCC) countries? This paper carries out an empirical analysis of the relationship between oil prices, oil‐ and non‐oil GDP, and remittances outflows from the GCC. The findings of our paper are three folds. First, we find that non‐oil GDP is a key determinant of remittance outflows and that oil GDP is a significant driver of non‐oil GDP in the GCC only in the long term. Second, we document that historically oil prices and remittances tend to broadly move in the same direction but that remittances have been much less volatile than oil prices. An analysis of the past large oil price declines shows that remittance flows to major remittance recipients in Mashreq, Pakistan, and Yemen fell only modestly following large declines in oil prices and recovered quickly in line with oil prices. Finally, we estimate the elasticity of remittance outflows with respect to non‐oil GDP in the GCC using various techniques. Estimates of short‐term elasticity vary between 0.5 and 0.8, while estimates of long‐term elasticity vary between 0.6 and 1.1. We find that construction and government services are two non‐oil GDP components that are strongly associated with remittance outflows.