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Asymmetric Information about Migrant Earnings and Remittance Flows

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  • Ganesh Seshan
  • Robertas Zubrickas

Abstract

We examine asymmetric information about migrant earnings and its implications for remittance behavior using a sample of Indian households with husbands working overseas in Qatar. On average, wives underreport their husbands’ income and underreporting is more prevalent in households with higher earning migrants. The discrepancy in earning reports is strongly correlated with variation in remittances: greater underreporting by wives is associated with lower remittances. We develop an exchange model of remittances with asymmetric information and costly state verification. The optimal remittance contract prescribes a threshold for remittances that invites verification only if unmet. The model's predictions closely match our empirical findings.

Suggested Citation

  • Ganesh Seshan & Robertas Zubrickas, 2017. "Asymmetric Information about Migrant Earnings and Remittance Flows," The World Bank Economic Review, World Bank, vol. 31(1), pages 24-43.
    • Handle: RePEc:oup:wbecrv:v:31:y:2017:i:1:p:24-43.
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    File URL: http://hdl.handle.net/10.1093/wber/lhv032
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    1. Williamson, Oliver, 2009. "The Theory of the Firm as Governance Structure: From Choice to Contract," Ekonomicheskaya Politika / Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, pages 111-134, December.
    2. Dharmapala, Dhammika & Slemrod, Joel & Wilson, John Douglas, 2011. "Tax policy and the missing middle: Optimal tax remittance with firm-level administrative costs," Journal of Public Economics, Elsevier, vol. 95(9-10), pages 1036-1047, October.
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    Cited by:

    1. Mobarak, Ahmed Mushfiq & Sharif, Iffath & Shrestha, Maheshwor, 2021. "Returns to International Migration: Evidence from a Bangladesh-Malaysia Visa Lottery," IZA Discussion Papers 14232, Institute of Labor Economics (IZA).
    2. Joachim De Weerdt & Garance Genicot & Alice Mesnard, 2019. "Asymmetry of Information within Family Networks," Journal of Human Resources, University of Wisconsin Press, vol. 54(1), pages 225-254.
    3. Kazianga, Harounan & Wahhaj, Zaki, 2020. "Will urban migrants formally insure their rural relatives? Family networks and rainfall index insurance in Burkina Faso," World Development, Elsevier, vol. 128(C).
    4. Murard, Elie, 2016. "Consumption and Leisure: The Welfare Impact of Migration on Family Left Behind," IZA Discussion Papers 10305, Institute of Labor Economics (IZA).
    5. Catia Batista & Gaia Narciso, 2018. "Migrant Remittances and Information Flows: Evidence from a Field Experiment," The World Bank Economic Review, World Bank, vol. 32(1), pages 203-219.
    6. Carolina Alban Conto, 2021. "Does Distance-Driven Information Asymmetry Affect Private Income Transfers? Theory and Evidence From Colombia," Working Papers hal-03192955, HAL.
    7. Thomas Joseph & Yaw Nyarko & Shing-Yi Wang, 2018. "Asymmetric Information and Remittances: Evidence from Matched Administrative Data," American Economic Journal: Applied Economics, American Economic Association, vol. 10(2), pages 58-100, April.
    8. Giuseppe Arcangelis & Majlinda Joxhe, 2021. "Intra-household allocation with shared expenditure choices: experimental evidence from Filipino migrants," Review of Economics of the Household, Springer, vol. 19(4), pages 1245-1274, December.
    9. De Arcangelis, Giuseppe & Fertig, Alexander & Liang, Yuna & Srouji, Peter & Yang, Dean, 2023. "Measuring remittances," Journal of Development Economics, Elsevier, vol. 161(C).
    10. Kaufmann, Marc & Machado, Joël & Verheyden, Bertrand, 2021. "Why Do Migrants Stay Unexpectedly? Misperceptions and Implications for Integration," IZA Discussion Papers 14155, Institute of Labor Economics (IZA).
    11. Ur Rehman, Obeid, 2023. "Spousal communication and information sharing: Evidence from migrants and their spouses," Journal of Development Economics, Elsevier, vol. 165(C).
    12. Yalei Zhai & Hisaki Kono, 2021. "The poor receive less: Remittance behaviour of female migrants in Myanmar," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(5), pages 910-926, July.
    13. Giuseppe Arcangelis & Majlinda Joxhe, 0. "Intra-household allocation with shared expenditure choices: experimental evidence from Filipino migrants," Review of Economics of the Household, Springer, vol. 0, pages 1-30.
    14. Kate Ambler & Susan Godlonton, 2020. "Information Asymmetries and Remittance Recipient Income: A Field Experiment in Malawi," Department of Economics Working Papers 2020-12, Department of Economics, Williams College.

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    More about this item

    Keywords

    asymmetric information; transnational household; remittance contracts; international migration; India; Qatar;
    All these keywords.

    JEL classification:

    • D13 - Microeconomics - - Household Behavior - - - Household Production and Intrahouse Allocation
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances

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