IDEAS home Printed from https://ideas.repec.org/a/eee/joepsy/v30y2009i3p321-334.html
   My bibliography  Save this article

Mental accounting and remittances: A study of rural Malawian households

Author

Listed:
  • Davies, Simon
  • Easaw, Joshy
  • Ghoshray, Atanu

Abstract

In this paper we use a behavioural approach to studying household consumption behaviour in Malawi. In particular we are interested to know whether households use mental accounting when consuming different categories of good. It is useful for assessing the impact of remittances on household consumption behaviour. We use 1998 cross-sectional data to find the following key results: (i) mental accounting systems are in operation; (ii) remittance income exhibits a lower marginal propensity to consume than other income sources, (iii) remittances are widely used to fund education consumption, (iv) credit plays an important role in funding education and farming.

Suggested Citation

  • Davies, Simon & Easaw, Joshy & Ghoshray, Atanu, 2009. "Mental accounting and remittances: A study of rural Malawian households," Journal of Economic Psychology, Elsevier, vol. 30(3), pages 321-334, June.
  • Handle: RePEc:eee:joepsy:v:30:y:2009:i:3:p:321-334
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0167-4870(09)00027-0
    Download Restriction: Full text for ScienceDirect subscribers only

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Zeldes, Stephen P, 1989. "Consumption and Liquidity Constraints: An Empirical Investigation," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 305-346, April.
    2. Adams, Richard H, Jr, 1991. "The Economic Uses and Impact of International Remittances in Rural Egypt," Economic Development and Cultural Change, University of Chicago Press, vol. 39(4), pages 695-722, July.
    3. Levin, Laurence, 1998. "Are assets fungible?: Testing the behavioral theory of life-cycle savings," Journal of Economic Behavior & Organization, Elsevier, vol. 36(1), pages 59-83, July.
    4. Mathias Dewatripont & Isabelle Brocas & Juan Carrillo, 2004. "Commitment devices under self-control problems: an overview," ULB Institutional Repository 2013/9665, ULB -- Universite Libre de Bruxelles.
    5. Sarah Harrower & John Hoddinott, 2005. "Consumption Smoothing in the Zone Lacustre, Mali," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 14(4), pages 489-519, December.
    6. Jean-Paul Azam & Flore Gubert, 2005. "Those in Kayes. The Impact of Remittances on Their Recipients in Africa," Revue économique, Presses de Sciences-Po, vol. 56(6), pages 1331-1358.
    7. Milton Friedman, 1957. "Introduction to "A Theory of the Consumption Function"," NBER Chapters,in: A Theory of the Consumption Function, pages 1-6 National Bureau of Economic Research, Inc.
    8. Anderson, C. Leigh & Nevitte, Neil, 2006. "Teach your children well: Values of thrift and saving," Journal of Economic Psychology, Elsevier, vol. 27(2), pages 247-261, April.
    9. Alejandra Cox Edwards & Manuelita Ureta, 2003. "International Migration, Remittances, and Schooling: Evidence from El Salvador," NBER Working Papers 9766, National Bureau of Economic Research, Inc.
    10. Ralph Chami & Connel Fullenkamp & Samir Jahjah, 2005. "Are Immigrant Remittance Flows a Source of Capital for Development?," IMF Staff Papers, Palgrave Macmillan, vol. 52(1), pages 55-81, April.
    11. Katz, Elizabeth G., 1995. "Gender and trade within the household: Observations from rural guatemala," World Development, Elsevier, vol. 23(2), pages 327-342, February.
    12. Adams, Richard H, Jr, 1998. "Remittances, Investment, and Rural Asset Accumulation in Pakistan," Economic Development and Cultural Change, University of Chicago Press, vol. 47(1), pages 155-173, October.
    13. Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1, April.
    14. McDonald, John F & Moffitt, Robert A, 1980. "The Uses of Tobit Analysis," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 318-321, May.
    15. Edwards, Alejandra Cox & Ureta, Manuelita, 2003. "International migration, remittances, and schooling: evidence from El Salvador," Journal of Development Economics, Elsevier, vol. 72(2), pages 429-461, December.
    16. Lucas, Robert E B, 1987. "Emigration to South Africa's Mines," American Economic Review, American Economic Association, vol. 77(3), pages 313-330, June.
    17. Udry, Christopher, 1990. "Credit Markets in Northern Nigeria: Credit as Insurance in a Rural Economy," World Bank Economic Review, World Bank Group, vol. 4(3), pages 251-269, September.
    18. Adams, Richard H., 2002. "Precautionary saving from different sources of income - evidence from rural Pakistan," Policy Research Working Paper Series 2761, The World Bank.
    19. Winnett, Adrian & Lewis, Alan, 1995. "Household accounts, mental accounts, and savings behaviour: Some old economics rediscovered?," Journal of Economic Psychology, Elsevier, vol. 16(3), pages 431-448, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Clot, Sophie & Andriamahefazafy, Fano & Grolleau, Gilles & Ibanez, Lisette & Méral, Philippe, 2015. "Compensation and Rewards for Environmental Services (CRES) and efficient design of contracts in developing countries. Behavioral insights from a natural field experiment," Ecological Economics, Elsevier, vol. 113(C), pages 85-96.
    2. Ngwenya, Mthunzi A. & Paas, Leonard J., 2012. "Lifecycle effects on consumer financial product portfolios in South Africa: An exploratory analysis of four ethnic groups," Journal of Economic Psychology, Elsevier, vol. 33(1), pages 8-18.
    3. Marcus H. Böhme, 2015. "Does migration raise agricultural investment? An empirical analysis for rural Mexico," Agricultural Economics, International Association of Agricultural Economists, vol. 46(2), pages 211-225, March.
    4. Waidler, Jennifer, 2016. "On the fungibility of public and private transfers: A mental accounting approach," MERIT Working Papers 060, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    5. Andrew V. Stephenson & Amanda Wilsker, 2016. "Consumption Effects of Foreign Remittances in Jamaica," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 22(3), pages 309-320, August.
    6. Christiaensen , Luc & Pan, Lei, 2012. "On the fungibility of spending and earnings -- evidence from rural China and Tanzania," Policy Research Working Paper Series 6298, The World Bank.
    7. Sophie Clot & Fano Andriamahefazafy & Gilles Grolleau & Lisette Ibanez & Philippe Méral, 2014. "Payments for Ecosystem Services: Can we kill two birds with one stone? Insights from a Natural Field Experiment in Madagascar," Working Papers 14-01, LAMETA, Universtiy of Montpellier, revised Jan 2014.
    8. John Yinger & Phuong Nguyen-Hoang, 2015. "The Behavioral Impacts of Poverty Tax Relief: Salience or Framing?," Center for Policy Research Working Papers 186, Center for Policy Research, Maxwell School, Syracuse University.
    9. Ann Vogel & Kim Korinek, 2012. "Passing by the Girls? Remittance Allocation for Educational Expenditures and Social Inequality in Nepal’s Households 2003–2004," International Migration Review, Wiley Blackwell, vol. 46(1), pages 61-100, March.
    10. Luc Christiaensen & Lei Pan, 2010. "Transfers and Development: Easy Come, Easy Go?," WIDER Working Paper Series 125, World Institute for Development Economic Research (UNU-WIDER).
    11. Michael Clemens and Timothy N. Ogden, 2014. "Migration as a Strategy for Household Finance: A Research Agenda on Remittances, Payments, and Development- Working Paper 354," Working Papers 354, Center for Global Development.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:joepsy:v:30:y:2009:i:3:p:321-334. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: http://www.elsevier.com/locate/joep .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.