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Remittances and Income Smoothing

  • Catalina Amuedo-Dorantes
  • Susan Pozo

Due to inadequate savings and binding borrowing constraints, income volatility can make households in developing countries particularly susceptible to economic hardship. We examine the role of remittances in either alleviating or increasing household income volatility using Mexican household level data over the 2000 through 2008 period. We correct for reverse causality and endogeneity and find that while income smoothing does not appear to be the main motive for sending remittances in a non-negligible share of households, remittances do indeed smooth household income on average. Other variables surrounding income volatility are also considered and evaluated.

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Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 101 (2011)
Issue (Month): 3 (May)
Pages: 582-87

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Handle: RePEc:aea:aecrev:v:101:y:2011:i:3:p:582-87
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  1. 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.
  2. Dean Yang & HwaJung Choi, 2005. "Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines," Working Papers 535, Research Seminar in International Economics, University of Michigan.
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