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Endogeneity and sample selection in a model for remittances

  • Giulia BETTIN

    ()

    (Universita' Politecnica delle Marche, Dipartimento di Economia)

  • Riccardo LUCCHETTI

    ()

    (Universita' Politecnica delle Marche, Dipartimento di Economia)

  • Alberto ZAZZARO

    ()

    (Universita' Politecnica delle Marche, Dipartimento di Economia)

We estimate a remittance model in which we address endogeneity and reverse causality relationships between remittances, pre-transfer income and consumption. In order to take into account the fact that a large share of individuals do not remit, instrumental variable variants of the double-hurdle and Heckit selection models are proposed and estimated by Limited Information Maximum Likelihood (LIML). Our results for a sample of recent immigrants to Australia show that endogeneity is substantial and that estimates obtained by the methods previously employed in the literature may be very misleading if given a behavioural interpretation.

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Paper provided by Universita' Politecnica delle Marche (I), Dipartimento di Scienze Economiche e Sociali in its series Working Papers with number 361.

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Length: 39
Date of creation: Jun 2011
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Handle: RePEc:anc:wpaper:361
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