Microeconomic Implications of Remittances in an Overlapping Generations Model with Altruism and a Motive to Receive Inheritance

The article develops a framework to examine the interaction between the migrant and the remittance-receiving relative(s) under non-cooperative and cooperative scenarios. The model has an overlapping generations' structure where both parties have altruistic behavioural traits. We derive the relationships between the remittances, consumption, labour supply, savings, and bequests, and compare these variables under the two scenarios. For both scenarios, the remittances have a positive effect on the relative's leisure, consumption, and investment. The effects of the wage and the non-wage income of the relative and the migrant and the interest rate on the equilibrium level of remittances are also qualitatively similar under the two scenarios. However, the parties' degrees of altruism as well as the discount rates have different effects on the equilibrium level and incidence of remittances for the non-cooperative and cooperative interactions. These shed some light on the differences in remittance behaviour observed in empirical studies.