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Microeconomic Implications of Remittances in an Overlapping Generations Model with Altruism and Self-Interest

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Author Info

  • Tigran A. Melkonyan
  • David A. Grigorian

Abstract

The paper explicitly models the dynamic strategic aspects of the interaction between the migrant and the remittance-receiving relative(s), with the migrant behaving as a Stackelberg leader. It is also different from other formalizations of remittance behavior in its treatment of the two parties'' interaction to realize potential gains from exchange. We demonstrate that when the migrant and the relative(s) cooperate to maximize the joint utility of the household, this leads to higher level of remittances as well as investment and hours worked by the relative(s). We use data from Armenia to test our predictions regarding implications of remittances flows on behavior of receiving households. Consistent with our predictions, remittance-receiving households work fewer hours and spend less on the education of their children. While saving more, these households are not leveraging their savings to borrow from the banking system to expand their business activities. This evidence suggests that the benefits of remittances might be overstated and emphasizes the importance of measuring their impact in a general- rather than a partial-equilibrium context.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 08/19.

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Length: 41
Date of creation: 01 Jan 2008
Date of revision:
Handle: RePEc:imf:imfwpa:08/19

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Related research

Keywords: Migration; Workers remittances; Labor supply; remittances; migrant; remittance; impact of remittances; survey; probability; remittance flows; equation; effect of remittances; dummy variables; equations; diaspora; remittance-receiving households; predictions; migrant remittances; remitter; statistics; standard error; determinants of remittances; optimization; statistical service; impact of remittances on education; remittance transfers; fitted value; benefits of remittances; demand for remittances; remittances flows; amount of remittances; standard errors; money transfers; dummy variable; correlation; use of remittances; surveys; migrants ? remittances; remitters; effects of remittances; effect of remittances on growth; uses of remittances; statistic; flow of remittances; impact of remittances on household; productive use of remittances; capita remittance; developmental impact of remittances; migration remittances; international remittances; impact of remittances on investment; sample selection; decline in remittances; immigrant remittance; hypothesis testing; remittance incentives; econometrics; correlations; empirical estimation; separability; coefficients on remittances; measurement error; remittance amount; workers ? remittances;

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References

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Citations

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Cited by:
  1. Beyene, Berhe Mekonnen, 2012. "The Effects of International Remittances on Poverty and Inequality in Ethiopia," Memorandum 13/2012, Oslo University, Department of Economics.
  2. World Bank, 2009. "Armenia : Implications of the Global Economic Crisis for Poverty," World Bank Other Operational Studies 3119, The World Bank.
  3. de Brauw, Alan & Mueller, Valerie & Woldehanna, Tassew, 2011. "Insurance motives to remit: Evidence from a matched sample of Ethiopian internal migrants," IFPRI discussion papers 1090, International Food Policy Research Institute (IFPRI).
  4. Simon Davies, 2011. "What Motivates Gifts? Intra-Family Transfers in Rural Malawi," Journal of Family and Economic Issues, Springer, vol. 32(3), pages 473-492, September.
  5. Dorothee Crayen & Christa Hainz & Christiane Stöh de MartÍnez, 2013. "Remittances, Banking Status and the Usage of Insurance Schemes," Journal of Development Studies, Taylor & Francis Journals, vol. 49(6), pages 861-875, June.
  6. Garcia, Pablo M & Rodriguez-Montemayor, Eduardo, 2010. "A primer of international migration: The Latin American experience and a proposal for a research agenda," MPRA Paper 24147, University Library of Munich, Germany.
  7. Jadotte, Evans, 2009. "International Migration, Remittances and Labour Supply: The Case of the Republic of Haiti," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  8. Tigran A. Melkonyan & David A. Grigorian & J. Scott Shonkwiler, 2008. "Garbage in, Gospel Out? Controlling for the Underreporting of Remittances," IMF Working Papers 08/230, International Monetary Fund.
  9. Eduardo Rodríguez-Montemayor & Pablo M. García, 2009. "A Primer of International Migration: The Latin American Experience," IDB Publications 9327, Inter-American Development Bank.

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