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Income, consumption and remittances: Evidence from immigrants to Australia

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  • Bettin, Giulia
  • Lucchetti, Riccardo
  • Zazzaro, Alberto

Abstract

For many countries, remittance behaviour by migrants is an important component of their overall international financial flows. To date, the empirical literature has analysed the propensity to remit as a function of migrants' socio-economic characteristics. However, no studies have fully addressed the empirical implications of remittance behaviour being determined in the broader context of migrants' labour, income and consumption allocation strategy. On the contrary, the migrant's income has almost always been treated as exogenous in this context. The aim of this study is to estimate a remittance equation that detects the main determinants of remittance behaviour while addressing endogeneity and reverse causality relationships between remittances, income, consumption and savings. Moreover, since a large share of individuals do not remit money at all, an instrumental variable variant of the double-hurdle selection model is proposed and estimated by LIML. A sending country perspective is adopted in the empirical analysis by considering the first cohort of the Longitudinal Survey of Immigrants to Australia. We find that endogeneity is substantial and that estimates obtained by the methods previously employed in the literature may be very misleading if given a behavioural interpretation. Our results confirm some theoretical predictions and shed light on others; notably, we show that selfish motives in remitters are at least as important as altruistic motives. --

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Paper provided by Hamburg Institute of International Economics (HWWI) in its series HWWI Research Papers with number 3-21.

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Date of creation: 2009
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Handle: RePEc:zbw:hwwirp:3-21

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Keywords: Double-hurdle model; migration; remittances;

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Cited by:
  1. Giulia BETTIN & Riccardo LUCCHETTI, 2010. "Interval Regression Models with;Endogenous Explanatory Variables," Working Papers, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali 339, Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali.
  2. Tolciu, Andreia & Schaland, Ann-Julia & El-Cherkeh, Tanja, 2010. "Migrant entrepreneurship in Hamburg: Results from a qualitative study with Turkish entrepreneurs," HWWI Research Papers 3-22, Hamburg Institute of International Economics (HWWI).
  3. Meyer, Wiebke, 2012. "Motives for remitting from Germany to Kosovo," Studies on the Agricultural and Food Sector in Central and Eastern Europe, Leib­niz Institute of Agricultural Development in Central and Eastern Europe (IAMO), volume 69, number 69.

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