When Do Remittances Facilitate Asset Accumulation? The Importance of Remittance Income Uncertainty
A sizable literature has concluded that remittances impact the expenditure patterns of households. We explore how the uncertainty of remittance income inflows affects the accumulation of human, physical and financial assets of Mexican households, while accounting for the level of transfers from family abroad. We find that both the level and the uncertainty of remittance inflows raise asset accumulation among remittance-receiving households. Specifically, as predicted by the permanent income hypothesis and theories of precautionary saving, a one standard deviation increase in the uncertainty of remittance income raises the likelihood of household spending on asset accumulation by about 2 percentage points while raising the share of household expenditures on asset accumulation by 4 to 9 percent. These results suggest that both the level and the predictability of remittance income should be given full consideration in the analysis of household expenditure patterns and in the design of policies to leverage the most out of remittance inflows into developing economies.
|Date of creation:||Feb 2014|
|Date of revision:|
|Publication status:||published as 'Remittance income uncertainty and asset accumulation' in: IZA Journal of Labor & Development, 2014, 3:3|
|Contact details of provider:|| Postal: IZA, P.O. Box 7240, D-53072 Bonn, Germany|
Phone: +49 228 3894 223
Fax: +49 228 3894 180
Web page: http://www.iza.org
|Order Information:|| Postal: IZA, Margard Ody, P.O. Box 7240, D-53072 Bonn, Germany|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Glytsos, Nicholas P, 1993. "Measuring the Income Effects of Migrant Remittances: A Methodological Approach Applied to Greece," Economic Development and Cultural Change, University of Chicago Press, vol. 42(1), pages 131-68, October.
- 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.
- Hayne E. Leland, 1968. "Saving and Uncertainty: The Precautionary Demand for Saving," The Quarterly Journal of Economics, Oxford University Press, vol. 82(3), pages 465-473.
- Vera Chiodi & Esteban Jaimovich & Gabriel Montes-Rojas, 2012.
"Migration, Remittances and Capital Accumulation: Evidence from Rural Mexico,"
Journal of Development Studies,
Taylor & Francis Journals, vol. 48(8), pages 1139-1155, February.
- Vera Chiodi & Esteban Jaimovich & Gabriel Montes-Rojas, 2012. "Migration, Remittances and Capital Accumulation: Evidence from Rural Mexico," PSE - Labex "OSE-Ouvrir la Science Economique" hal-00813389, HAL.
- Vera Chiodi & Esteban Jaimovich & Gabriel Montes-Rojas, 2010. "Migration, Remittances and Capital Accumulation: Evidence from Rural Mexico," Carlo Alberto Notebooks 140, Collegio Carlo Alberto.
- Aberra Senbeta, 2013. "Remittances and the sources of growth," Applied Economics Letters, Taylor & Francis Journals, vol. 20(6), pages 572-580, April.
- Milton Friedman, 1957. "A Theory of the Consumption Function," NBER Books, National Bureau of Economic Research, Inc, number frie57-1.
- German A. Zarate-Hoyos, 2004. "Consumption and Remittances in Migrant Households: Toward a Productive Use of Remittances," Contemporary Economic Policy, Western Economic Association International, vol. 22(4), pages 555-565, October.
- K. Newey, Whitney, 1985. "Generalized method of moments specification testing," Journal of Econometrics, Elsevier, vol. 29(3), pages 229-256, September.
- Richard Adams, 2011. "Evaluating the Economic Impact of International Remittances On Developing Countries Using Household Surveys: A Literature Review," Journal of Development Studies, Taylor & Francis Journals, vol. 47(6), pages 809-828.
- Vera Chiodi & Vera Chiodi, 2012. "Migration and capital accumulation: Evidence from rural Mexico," Post-Print halshs-01063694, HAL.
When requesting a correction, please mention this item's handle: RePEc:iza:izadps:dp7983. 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: (Mark Fallak)
If references are entirely missing, you can add them using this form.