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Incentive Effects of Transfers within the Extended Family: The Case of Indonesia

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  • Schüler, Dana
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    Abstract

    This study sheds light on the efficiency of informal mutual insurance systems. Evidence on the behavioral effects of remittances and inter-family transfers is still rare. This paper intends to analyse the incentive effects of inter-family transfers in Indonesia with improved econometric techniques. First differences and three-stage least squares are used to analyse incentive effects on working hours. The endogeneity of transfers received and of the number of migrants sent away are explicitly taken into account. Furthermore, different sectors of employment are distinguished in the analysis. The empirical analysis indicates that inter-family transfers have an adverse influence on work effort in the informal and non-agricultural sector of the economy. Precisely, household members of working age reduce normal hours worked. No evidence is found that child work is reduced. However, the negative incentive effect is partly compensated by migrants, who are recipients rather than providers of transfers in the short run.

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    Paper provided by Verein für Socialpolitik, Research Committee Development Economics in its series Proceedings of the German Development Economics Conference, Göttingen 2007 with number 29.

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    Date of creation: 2007
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    Handle: RePEc:zbw:gdec07:7347

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    Keywords: Remittances; Tran --;

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    1. Marianne Bertrand & Sendhil Mullainathan & Douglas Miller, 2003. "Public Policy and Extended Families: Evidence from Pensions in South Africa," World Bank Economic Review, World Bank Group, vol. 17(1), pages 27-50, June.
    2. Azam, Jean-Paul & Gubert, Flore, 2004. "Those in Kayes: The Impact of Remittances on their Recipients in Africa," IDEI Working Papers 308, Institut d'Économie Industrielle (IDEI), Toulouse.
    3. Lykke E. Andersen & Bent Jesper Christensen & Oscar Molina, 2005. "The Impact of Aid on Recipient Behavior: A Micro-Level Dynamic Analysis of Remittances, Schooling, Work, Consumption, Investment and Social Mobility in Nicaragua," Development Research Working Paper Series 02/2005, Institute for Advanced Development Studies.
    4. Roberta Gatti, 2005. "Family Altruism and Incentives," Scandinavian Journal of Economics, Wiley Blackwell, vol. 107(1), pages 67-81, 03.
    5. Case, A. & Deaton, A., 1996. "Large Cash Transfers to the Elderly in South Africa," Papers 176, Princeton, Woodrow Wilson School - Development Studies.
    6. Azam, Jean-Paul & Gubert, Flore, 2005. "Migrant Remittances and Economic Development in Africa: A Review of Evidence," IDEI Working Papers 354, Institut d'Économie Industrielle (IDEI), Toulouse.
    7. Cameron, Lisa A. & Cobb-Clark, Deborah A., 2001. "Old-Age Support in Developing Countries: Labor Supply, Intergenerational Transfers and Living Arrangements," IZA Discussion Papers 289, Institute for the Study of Labor (IZA).
    8. Funkhouser, Edward, 1992. "Migration from Nicaragua: some recent evidence," World Development, Elsevier, vol. 20(8), pages 1209-1218, August.
    9. Samir Jahjah & Ralph Chami & Connel Fullenkamp, 2003. "Are Immigrant Remittance Flows a Source of Capital for Development," IMF Working Papers 03/189, International Monetary Fund.
    10. J. Edward Taylor & Scott Rozelle & Alan deBrauw, 1999. "Migration, Remittances, and Agricultural Productivity in China," American Economic Review, American Economic Association, vol. 89(2), pages 287-291, May.
    11. Yang, Dean, 2005. "International migration, human capital, and entrepreneurship : evidence from Philippine migrants'exchange rate shocks," Policy Research Working Paper Series 3578, The World Bank.
    12. Park, Cheolsung, 2003. "Interhousehold Transfers between Relatives in Indonesia: Determinants and Motives," Economic Development and Cultural Change, University of Chicago Press, vol. 51(4), pages 929-44, July.
    13. Collier, Paul & Lal, Deepak, 1984. "Why poor people get rich: Kenya 1960-1979," World Development, Elsevier, vol. 12(10), pages 1007-1018, October.
    14. Marianne Bertrand & Douglas Miller & Sendhil Mullainathan, 1999. "Public Policy and Extended Families: Evidence from South Africa," Working Papers 801, Princeton University, Department of Economics, Industrial Relations Section..
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