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Do happiness and foreign aid affect bilateral migrant remittances?

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Author Info

  • B. Mak Arvin
  • Byron Lew

Abstract

Purpose – Studies on the determinants of remittances focus primarily on a single country or undertake cross-country analyses using aggregate data. By comparison, there is a dearth of empirical evidence on the determinants of remittances from multiple host to multiple destination countries. To address this deficiency, the purpose of this paper is to use a novel dataset which captures these bilateral flows. Design/methodology/approach – The paper concentrates on three sets of explanatory variables: those which characterize the pair relationship, those that pertain to migrants' host country, and those related to the migrants' home country. Findings – Cultural and political factors play a fundamental role. Altruism is not key in migrant remittances; investment motives are more important. Bilateral aid inflows bear a direct relationship to remittances. The marginal effect of happiness (in migrants' host and home countries) on remittances is positive for a large percentage of countries in the sample. Practical implications – Results nullify the oft-asserted role of remittances in assisting with adverse economic conditions, such as inflation. They also identify a possible nexus between remittances and foreign aid – a link that heretofore has not been identified or discussed in the literature or recognized by policy-makers. Originality/value – The contribution of the paper is its use of bilateral data to present evidence on remittances capturing not only North-South, but also South-South flows. The paper also contributes to the literature by considering, for the first time, some additional variables as potential determinants of remittances, chief among them the level of happiness of migrants' host and home countries, as well as the level of aid disbursed to migrants' home country. JEL classification: F24, F35, O11, O19

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Bibliographic Info

Article provided by Emerald Group Publishing in its journal Journal of Economic Studies.

Volume (Year): 39 (2012)
Issue (Month): 2 (May)
Pages: 212-230

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Handle: RePEc:eme:jespps:v:39:y:2012:i:2:p:212-230

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Related research

Keywords: Bilateral remittances; Country characteristics; Foreign aid; Happiness; Immigration; International aid;

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References

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  1. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2007. "Governance Matters VI: Aggregate and Individual Governance Indicators, 1996-2006," Policy Research Working Paper Series 4280, The World Bank.
  2. Bruno S. Frey, 2008. "Happiness: A Revolution in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262062771.
  3. El-Sakka, M. I. T. & McNabb, Robert, 1999. "The Macroeconomic Determinants of Emigrant Remittances," World Development, Elsevier, vol. 27(8), pages 1493-1502, August.
  4. Freund, Caroline & Spatafora, Nikola, 2008. "Remittances, transaction costs, and informality," Journal of Development Economics, Elsevier, vol. 86(2), pages 356-366, June.
  5. Ahmet Murat Alper & Bilin Neyapti, 2006. "Determinants of Workers' Remittances: Turkish Evidence from High-Frequency Data," Eastern European Economics, M.E. Sharpe, Inc., vol. 44(5), pages 91-100, October.
  6. Faini, Riccardo, 1994. "Workers Remittances and the Real Exchange Rate: A Quantitative Framework," Journal of Population Economics, Springer, vol. 7(2), pages 235-45.
  7. Dalia Hakura & Ralph Chami & Peter Montiel, 2009. "Remittances: An Automatic Output Stabilizer?," IMF Working Papers 09/91, International Monetary Fund.
  8. Catrinescu, Natalia & Leon-Ledesma, Miguel & Piracha, Matloob & Quillin, Bryce, 2006. "Remittances, Institutions and Economic Growth," IZA Discussion Papers 2139, Institute for the Study of Labor (IZA).
  9. Kaufmann, Daniel & Kraay, Aart & Mastruzzi, Massimo, 2009. "Governance matters VIII : aggregate and individual governance indicators 1996-2008," Policy Research Working Paper Series 4978, The World Bank.
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