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Motives and Giving Norms behind Remittances: the Case of Filipino Overseas Workers and their Recipient Households

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  • Alba, Michael M.
  • Sugui, Jessaine Soraya C.
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    Abstract

    The literature has focused on motives to explain remittance behavior. But as nonanonymous transfers, remittances are apt to be influenced by giving norms as well. We formulate an empirical specification that takes account of remittance motives involving worker-household pairs. We find that altruism dominates the exchange motive among overseas workers who are likely to be the primary breadwinners of their recipient households. We also find that in the subsample in which overseas workers are likely to be secondary breadwinners, (a) household labor income is an endogenous explanatory variable, and (b) the error covariance of the household income and remittance selection equations is positive. A possible reason for (a) is that secondary breadwinners use household income as an imperfect signal of opportunity cost or to detect unobserved effort, i.e., moral hazard, in generating income. As for (b), we surmise that it indicates the presence of incentive-compatible mechanisms against moral hazard. On giving norms, we find that, in samples that include overseas workers who are secondary breadwinners, remittance amounts are afflicted with negative selectivity. We present evidence that this is consistent with Filipino giving practices in which everyone gives but in modest amounts.

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    Bibliographic Info

    Paper provided by Philippine Institute for Development Studies in its series Discussion Papers with number DP 2009-26.

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    Length: 84
    Date of creation: 2009
    Date of revision:
    Handle: RePEc:phd:dpaper:dp_2009-26

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    Keywords: remittances; remittance motives; giving norms;

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    1. HwaJung Choi, 2007. "Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines," World Bank Economic Review, World Bank Group, World Bank Group, vol. 21(2), pages 219-248, May.
    2. Ernst Fehr & Simon Gaechter, . "Fairness and Retaliation: The Economics of Reciprocitys," IEW - Working Papers 040, Institute for Empirical Research in Economics - University of Zurich.
    3. Osili, Una Okonkwo, 2007. "Remittances and savings from international migration: Theory and evidence using a matched sample," Journal of Development Economics, Elsevier, Elsevier, vol. 83(2), pages 446-465, July.
    4. 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, Elsevier, vol. 68(2), pages 309-328, August.
    5. Hoddinott, John, 1994. "A Model of Migration and Remittances Applied to Western Kenya," Oxford Economic Papers, Oxford University Press, vol. 46(3), pages 459-76, July.
    6. Funkhouser, Edward, 1995. "Remittances from International Migration: A Comparison of El Salvador and Nicaragua," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 137-46, February.
    7. Rivers, Douglas & Vuong, Quang H., 1988. "Limited information estimators and exogeneity tests for simultaneous probit models," Journal of Econometrics, Elsevier, Elsevier, vol. 39(3), pages 347-366, November.
    8. Paxson, Christina H, 1992. "Using Weather Variability to Estimate the Response of Savings to Transitory Income in Thailand," American Economic Review, American Economic Association, American Economic Association, vol. 82(1), pages 15-33, March.
    9. Lucas, Robert E B & Stark, Oded, 1985. "Motivations to Remit: Evidence from Botswana," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 93(5), pages 901-18, October.
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