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Consumption Effects of Foreign Remittances in Jamaica

Author

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  • Andrew V. Stephenson

    (Georgia Gwinnett College)

  • Amanda Wilsker

    (Georgia Gwinnett College)

Abstract

The term remittances refers to proceeds from the migration of labor that are sent to aid individuals remaining in the migrants’ home communities. In this paper, we investigate whether remittances alter the consumption pattern of recipient households in Jamaica. We present results from an Engel curve estimation specifically using the Working (1943) approach and a two-part fractional response model with instrumental variables to account for selection bias and endogeneity of remittances. The dependent variables are a subsample of the categories of consumption as defined in the Jamaican Survey of Living Conditions and include expenditures on food, schooling, health, gambling, alcohol and donations. We find that receipt of remittances significantly alters the recipient households’ expenditure allocations relative to other sources of income, although this effect occurs more through the participation decision. Overall, total effects of remittances are largest in the areas of luxury expenditures and home production, and to a lesser extent for education and grocery store purchases. These findings have significant implications for those remitting, those receiving, and governments looking to understand this large flow and less documented source of income.

Suggested Citation

  • 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.
  • Handle: RePEc:kap:iaecre:v:22:y:2016:i:3:d:10.1007_s11294-016-9595-7
    DOI: 10.1007/s11294-016-9595-7
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    Cited by:

    1. Bose-Duker, Theophiline & Henry, Michael & Strobl, Eric, 2021. "Child fostering and the educational outcomes of Jamaican children," International Journal of Educational Development, Elsevier, vol. 87(C).
    2. Artjoms Ivlevs, 2021. "Does Emigration Affect Pro‐environmental Behaviour Back Home? A Long‐Term, Local‐Level Perspective," Kyklos, Wiley Blackwell, vol. 74(1), pages 48-76, February.
    3. Theophiline Bose-Duker & Michael Henry & Eric Strobl, 2021. "Children’s Resource Shares: Male Versus Female-Headed Households," Journal of Family and Economic Issues, Springer, vol. 42(4), pages 573-585, December.

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    More about this item

    Keywords

    Remittances; Two-part fractional response model; Jamaica;
    All these keywords.

    JEL classification:

    • O50 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - General
    • O54 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Latin America; Caribbean
    • O57 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries

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