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Do Remittances Influence Household Investment Decisions? Evidence from Sub-Saharan Africa

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  • Md Shahadath Hossain

    (Department of Economics, Binghamton Univeristy)

  • Adesola Sunmoni

    (Department of Economics, University of Reading)

Abstract

The impact of remittances on left behind households is ambiguous a priori due to competing income and substitution effects. Similarly, empirical evidence in the literature is inconclusive. We offer new evidence on the effect of remittances on household investment decisions. We enrich our analysis by considering different types of capital investment and remittance sources. We use data from the World Bank’s Migration and Remittances Household Survey, a recursive bivariate probit model, and instrumental variables approach to account for endogeneity concerns. We find that remittance-receiving households in sub-Saharan Africa are more likely to invest in human and social capital compared to non-remittance receiving households. However, there is substantial variation in investment behaviour across countries. We also show the heterogeneous effect of remittance sources on investment behaviour. Our study is relevant for policymakers seeking to maximise the impact of remittances to foster local economic opportunities.

Suggested Citation

  • Md Shahadath Hossain & Adesola Sunmoni, "undated". "Do Remittances Influence Household Investment Decisions? Evidence from Sub-Saharan Africa," Economics Discussion Papers em-dp2021-04, Department of Economics, University of Reading.
    • Handle: RePEc:rdg:emxxdp:em-dp2021-04
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    File URL: http://www.reading.ac.uk/web/FILES/economics/emdp202104.pdf
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    More about this item

    Keywords

    Remittances; Investments; Africa; Physical capital; Human capital; Social Capital;
    All these keywords.

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • J61 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Geographic Labor Mobility; Immigrant Workers

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