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State dependence and unobserved heterogeneity in a double hurdle model for remittances: evidence from immigrants to Germany

Author

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  • Giulia Bettin

    (Università Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali, MoFiR)

  • Riccardo Lucchetti

    (Università Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)

  • Claudia Pigini

    (Università Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)

Abstract

The empirical modelling of remitting behaviour has been the object of a considerable amount of micro-level literature. The increasing availability of panel datasets makes it possible to explore the persistence in transfer decisions as a result of intertemporal choices, that may be consistent with several motivations to remit. Building a dynamic model with panel data poses the additional problem of dealing properly with permanent unobserved heterogeneity; moreover, the specific censored nature of international transfers has to be accounted for as well. In this paper, we propose a dynamic, random-effects double hurdle model for remittances: we combine the Maximum Likelihood estimator of the traditional double hurdle model for cross-section data (Jones, 1989) with the approach put forward by Heckman (1981b) for dealing with state dependence and unobserved heterogeneity in a non-linear setting. Our empirical evidence based on the German SOEP dataset suggests that there is significant state dependence in remitting behaviour consistent with migrants. intertemporal allocation of savings; at the same time, transaction costs are likely to affect the steadiness of transfers over time.

Suggested Citation

  • Giulia Bettin & Riccardo Lucchetti & Claudia Pigini, 2016. "State dependence and unobserved heterogeneity in a double hurdle model for remittances: evidence from immigrants to Germany," Mo.Fi.R. Working Papers 127, Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences.
  • Handle: RePEc:anc:wmofir:127
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    More about this item

    Keywords

    Migration; Remittances; State dependence; Double hurdle; Intertemporal choices;
    All these keywords.

    JEL classification:

    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C34 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Truncated and Censored Models; Switching Regression Models
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions

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