Remittances as pure or precautionary investment? Risk, savings and return migration
AbstractThis paper provides a theory of migrants? decisions to remit and save under uncertainty in connection with future location decisions. We show that the impact of remittances on the risk faced by the migrant is more complex than usually acknowledged. On the one hand, their effect on aggregate risk is non-monotonic. On the other hand, their impact on the geographical location of risk might be counter-intuitive, as remittances increase the migrant?s exposure to risk in the origin country. Also, marginal returns to remittances may be increasing, at least locally, due to the endogeneity of the future location. Interior solutions are therefore not guaranteed, and liquidity constraints faced by migrants may be binding. Finally, undocumented migrants are shown to be more likely to remit than legal migrants.
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Bibliographic InfoPaper provided by CEPS/INSTEAD in its series CEPS/INSTEAD Working Paper Series with number 2010-39.
Length: 44 pages
Date of creation: Dec 2010
Date of revision:
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return migration; remittances; risk; investment;
Find related papers by JEL classification:
- D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- O15 - Economic Development, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-12-23 (All new papers)
- NEP-CWA-2010-12-23 (Central & Western Asia)
- NEP-MIG-2010-12-23 (Economics of Human Migration)
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- de la Briere, Benedicte & Sadoulet, Elisabeth & de Janvry, Alain & Lambert, Sylvie, 2002. "The roles of destination, gender, and household composition in explaining remittances: an analysis for the Dominican Sierra," Journal of Development Economics, Elsevier, vol. 68(2), pages 309-328, August.
- Catalina Amuedo-Dorantes & Susan Pozo, 2006. "Remittances as insurance: evidence from Mexican immigrants," Journal of Population Economics, Springer, vol. 19(2), pages 227-254, June.
- Adams, Richard H, Jr, 1998. "Remittances, Investment, and Rural Asset Accumulation in Pakistan," Economic Development and Cultural Change, University of Chicago Press, vol. 47(1), pages 155-73, October.
- Victoria Licuanan & Toman Omar Mahmoud & Andreas Steinmayr, 2012. "The Drivers of Diaspora Donations for Development: Evidence from the Philippines," Kiel Working Papers 1807, Kiel Institute for the World Economy.
- Matthias Lücke & Toman Omar Mahmoud & Christian Peuker, 2012. "Identifying the Motives of Migrant Philanthropy," Kiel Working Papers 1790, Kiel Institute for the World Economy.
- Diego Alberto Sandoval Herrera & María Fernanda Reyes Roa, 2012. "¿Por qué los migrantes envían remesas?: Repaso de las principales motivaciones microeconómicas," BORRADORES DE ECONOMIA 010036, BANCO DE LA REPÚBLICA.
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