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Workers' Remittances, Remittance Decay and Financial Deepening in Developing Countries

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  • C. Kenrick Hunte

Abstract

Using a model and crosscountry, panel-data for eighteen developing countries, this paper confirms the remittance decay hypothesis, in which remittances decrease as household income increases. A one percent increase in household income results in a 0.8 percent decrease in remittances. Migrant workers respond to negative shocks to household income by increasing remittance flows, after accounting for the marginal propensity to remit times the difference between the threshold income level and household income. The paper demonstrates that remittances have a positive impact on financial deepening and policymakers should consider adding incentives for enhancing remittance flows, as remittances influence saving behavior.

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  • C. Kenrick Hunte, 2004. "Workers' Remittances, Remittance Decay and Financial Deepening in Developing Countries," The American Economist, Sage Publications, vol. 48(2), pages 82-94, October.
    • Handle: RePEc:sae:amerec:v:48:y:2004:i:2:p:82-94
    DOI: 10.1177/056943450404800208
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    Cited by:

    1. Rukmani Gounder, 2018. "An Empirical Analysis of the Time Pattern of Remittances and Tongan Migrants in New Zealand," Discussion Papers 1801, School of Economics and Finance, Massey University, New Zealand.
    2. Richard P.C. Brown & Fabrizio Carmignani, 2015. "Revisiting the Effects of Remittances on Bank Credit: A Macro Perspective," Scottish Journal of Political Economy, Scottish Economic Society, vol. 62(5), pages 454-485, November.
    3. Daren Conrad & Benjamin Ramkissoon & Sara Mohammed, 2018. "Back to Basics: Remittances in the Keynesian Macroeconomic Framework," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 24(3), pages 233-238, August.

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