Remittances, Liquidity Constraints and Human Capital Investments in Ecuador
AbstractOver the last decade Ecuador has experienced a strong increase in financial transfers from migrated workers, amounting to 6.4 percent of GDP and 31.5 percent of total exports of goods and services in 2005. This paper investigates how remittances via trans-national networks affect human capital investments through relaxing resource constraints and facilitate households in consumption smoothing by reducing vulnerability to economic shocks. In particular, we explore the effects of remittances on school enrolment and child work in Ecuador. Identification relies on instrumental variables, exploiting information on source countries of remittances and regional variation in the availability of bank offices that function as formal channels for sending remittances. Our results show that remittances increase school enrolment and decrease incidence of child work, especially for girls and in rural areas. Furthermore, we find that aggregate shocks are associated with increased work activities, while remittances are used to finance education when households are faced with these shocks. This suggests that liquidity constraints and vulnerability to covariate risk are especially relevant in rural areas, as it affects household’s investments in human capital of school age children. In this context both child labour supply and transnational remittances serve as coping mechanisms.
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Bibliographic InfoPaper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3358.
Length: 37 pages
Date of creation: Feb 2008
Date of revision:
Publication status: published in: World Development, 2009, 37 (6), 1143-1154
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Other versions of this item:
- Calero, Carla & Bedi, Arjun S. & Sparrow, Robert, 2009. "Remittances, Liquidity Constraints and Human Capital Investments in Ecuador," World Development, Elsevier, vol. 37(6), pages 1143-1154, June.
- Calero, C. & Bedi, A.S. & Sparrow, R.A., 2008. "Remittances, liquidity constraints and human capital investments in Ecuador," ISS Working Papers - General Series 18735, International Institute of Social Studies of Erasmus University Rotterdam (ISS), The Hague.
- I20 - Health, Education, and Welfare - - Education - - - General
- J22 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Time Allocation and Labor Supply
- 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-2008-03-15 (All new papers)
- NEP-DEV-2008-03-15 (Development)
- NEP-EDU-2008-03-15 (Education)
- NEP-HRM-2008-03-15 (Human Capital & Human Resource Management)
- NEP-LAM-2008-03-15 (Central & South America)
- NEP-MIG-2008-03-15 (Economics of Human Migration)
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