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Endogeneity and sample selection in a model for remittances

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

We estimate a remittance model in which we address endogeneity and reverse causality relationships between immigrants' remittances, pre-transfer income and consumption. In order to take into account the fact that a large share of individuals do not remit, instrumental variable variants of the double-hurdle and Heckit selection models are proposed and estimated by Limited Information ML; semiparametric extensions are considered as robustness checks. Our results for a sample of recent immigrants to Australia show that endogeneity is substantial and that estimates obtained by the methods previously employed in the literature may be misleading if given a behavioral interpretation.

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Article provided by Elsevier in its journal Journal of Development Economics.

Volume (Year): 99 (2012)
Issue (Month): 2 ()
Pages: 370-384

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Handle: RePEc:eee:deveco:v:99:y:2012:i:2:p:370-384
DOI: 10.1016/j.jdeveco.2012.05.001
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