A dynamic double hurdle model for remittances: evidence from Germany

In the last thirty years, migrant remittances have become a stable source of external finance for developing countries. In this paper, we investigate whether aggregate persistence can be traced back to individual remitting behaviour, as a result of migrants’ intertemporal choices. We propose a dynamic random-effects double hurdle model based on micro data from the German Socio-Economic Panel dataset. Our results show that there is significant state dependence in remitting behaviour, but in steady-state neither the probability to remit nor the transferred amounts are particularly large, thus suggesting that long-term intertemporal planning is rather sporadic. On these grounds, the medium-long term counterbalancing effect of remittances on the brain drain appears to be weak.