IDEAS home Printed from https://ideas.repec.org/p/zbw/hwwirp/3-21.html
   My bibliography  Save this paper

Income, consumption and remittances: Evidence from immigrants to Australia

Author

Listed:
  • Bettin, Giulia
  • Lucchetti, Riccardo
  • Zazzaro, Alberto

Abstract

For many countries, remittance behaviour by migrants is an important component of their overall international financial flows. To date, the empirical literature has analysed the propensity to remit as a function of migrants' socio-economic characteristics. However, no studies have fully addressed the empirical implications of remittance behaviour being determined in the broader context of migrants' labour, income and consumption allocation strategy. On the contrary, the migrant's income has almost always been treated as exogenous in this context. The aim of this study is to estimate a remittance equation that detects the main determinants of remittance behaviour while addressing endogeneity and reverse causality relationships between remittances, income, consumption and savings. Moreover, since a large share of individuals do not remit money at all, an instrumental variable variant of the double-hurdle selection model is proposed and estimated by LIML. A sending country perspective is adopted in the empirical analysis by considering the first cohort of the Longitudinal Survey of Immigrants to Australia. We find 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. Our results confirm some theoretical predictions and shed light on others; notably, we show that selfish motives in remitters are at least as important as altruistic motives.

Suggested Citation

  • Bettin, Giulia & Lucchetti, Riccardo & Zazzaro, Alberto, 2009. "Income, consumption and remittances: Evidence from immigrants to Australia," HWWI Research Papers 3-21, Hamburg Institute of International Economics (HWWI).
  • Handle: RePEc:zbw:hwwirp:3-21
    as

    Download full text from publisher

    File URL: https://www.econstor.eu/bitstream/10419/48258/1/664206425.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Esteves, Rui & Khoudour-Castéras, David, 2011. "Remittances, capital flows and financial development during the mass migration period, 1870–1913," European Review of Economic History, Cambridge University Press, vol. 15(03), pages 443-474, December.
    2. Eugenia Markova & Barry Reilly, 2007. "Bulgarian Migrant Remittances and Legal Status: Some Micro-Level Evidence from Madrid," South-Eastern Europe Journal of Economics, Association of Economic Universities of South and Eastern Europe and the Black Sea Region, vol. 5(1), pages 55-69.
    3. Cardoso, Ana Rute & Fontainha, Elsa & Monfardini, Chiara, 2008. "Children and Parents Time Use: Empirical Evidence on Investment in Human Capital in France, Italy and Germany," IZA Discussion Papers 3815, Institute for the Study of Labor (IZA).
    4. Mathias Sinning, 2011. "Determinants of savings and remittances: empirical evidence from immigrants to Germany," Review of Economics of the Household, Springer, vol. 9(1), pages 45-67, March.
    5. Ralph Chami & Connel Fullenkamp & Samir Jahjah, 2005. "Are Immigrant Remittance Flows a Source of Capital for Development?," IMF Staff Papers, Palgrave Macmillan, vol. 52(1), pages 55-81, April.
    6. Giuliano, Paola & Ruiz-Arranz, Marta, 2009. "Remittances, financial development, and growth," Journal of Development Economics, Elsevier, vol. 90(1), pages 144-152, September.
    7. Albert Bollard & David McKenzie & Melanie Morten, 2009. "The Remitting Patterns of African Migrants in the OECD," CReAM Discussion Paper Series 0921, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London.
    8. Vuong, Quang H, 1989. "Likelihood Ratio Tests for Model Selection and Non-nested Hypotheses," Econometrica, Econometric Society, vol. 57(2), pages 307-333, March.
    9. Naufal, George S, 2007. "Who Remits? The Case of Nicaragua," IZA Discussion Papers 3081, Institute for the Study of Labor (IZA).
    10. Papaioannou, Elias, 2009. "What drives international financial flows? Politics, institutions and other determinants," Journal of Development Economics, Elsevier, vol. 88(2), pages 269-281, March.
    11. Rapoport, Hillel & Docquier, Frederic, 2006. "The Economics of Migrants' Remittances," Handbook on the Economics of Giving, Reciprocity and Altruism, Elsevier.
    12. Cragg, John G, 1971. "Some Statistical Models for Limited Dependent Variables with Application to the Demand for Durable Goods," Econometrica, Econometric Society, vol. 39(5), pages 829-844, September.
    13. Oded Stark, 2009. "Reasons for Remitting," World Economics, World Economics, 1 Ivory Square, Plantation Wharf, London, United Kingdom, SW11 3UE, vol. 10(3), pages 147-158, July.
    14. Abdih, Yasser & Chami, Ralph & Dagher, Jihad & Montiel, Peter, 2012. "Remittances and Institutions: Are Remittances a Curse?," World Development, Elsevier, vol. 40(4), pages 657-666.
    15. Ilahi, Nadeem & Jafarey, Saqib, 1999. "Guestworker migration, remittances and the extended family: evidence from Pakistan," Journal of Development Economics, Elsevier, vol. 58(2), pages 485-512, April.
    16. Lucas, Robert E B & Stark, Oded, 1985. "Motivations to Remit: Evidence from Botswana," Journal of Political Economy, University of Chicago Press, vol. 93(5), pages 901-918, October.
    17. Niimi, Yoko & Ozden, Caglar, 2006. "Migration and remittances : causes and linkages," Policy Research Working Paper Series 4087, The World Bank.
    18. Giulia Bettin & Riccardo Lucchetti, . "Instrumental Variable Interval Regression," EHUCHAPS, Universidad del País Vasco - Facultad de Ciencias Económicas y Empresariales.
    19. Jørgen Carling, 2008. "The determinants of migrant remittances," Oxford Review of Economic Policy, Oxford University Press, vol. 24(3), pages 582-599, Autumn.
    20. Hoddinott, John, 1992. "Modelling Remittance Flows in Kenya," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 1(2), pages 206-232, August.
    21. Hatton, Timothy J. & Williamson, Jeffrey G., 1998. "The Age of Mass Migration: Causes and Economic Impact," OUP Catalogue, Oxford University Press, number 9780195116519.
    22. Catrinescu, Natalia & Leon-Ledesma, Miguel & Piracha, Matloob & Quillin, Bryce, 2009. "Remittances, Institutions, and Economic Growth," World Development, Elsevier, vol. 37(1), pages 81-92, January.
    23. White, Halbert, 1982. "Maximum Likelihood Estimation of Misspecified Models," Econometrica, Econometric Society, vol. 50(1), pages 1-25, January.
    24. Banerjee, Biswajit, 1984. "The probability, size and uses of remittances from urban to rural areas in India," Journal of Development Economics, Elsevier, vol. 16(3), pages 293-311, December.
    25. de la Briere, Benedicte & Sadoulet, Elisabeth & de Janvry, Alain & Lambert, Sylvie, 2002. "The roles of destination, gender, and household composition in explaining remittances: an analysis for the Dominican Sierra," Journal of Development Economics, Elsevier, vol. 68(2), pages 309-328, August.
    26. Freund, Caroline & Spatafora, Nikola, 2005. "Remittances : transaction costs, determinants, and informal flows," Policy Research Working Paper Series 3704, The World Bank.
    27. Cox, Donald & Eser, Zekeriya & Jimenez, Emmanuel, 1998. "Motives for private transfers over the life cycle: An analytical framework and evidence for Peru," Journal of Development Economics, Elsevier, vol. 55(1), pages 57-80, February.
    28. Giulia Bettin & Alberto Zazzaro, 2012. "Remittances And Financial Development: Substitutes Or Complements In Economic Growth?," Bulletin of Economic Research, Wiley Blackwell, vol. 64(4), pages 509-536, October.
    29. Blundell, Richard & Smith, Richard J., 1994. "Coherency and estimation in simultaneous models with censored or qualitative dependent variables," Journal of Econometrics, Elsevier, vol. 64(1-2), pages 355-373.
    30. Poirine, Bernard, 1997. "A theory of remittances as an implicit family loan arrangement," World Development, Elsevier, vol. 25(4), pages 589-611, January.
    31. Blundell, Richard & Ham, John & Meghir, Costas, 1987. "Unemployment and Female Labour Supply," Economic Journal, Royal Economic Society, vol. 97(388a), pages 44-64, Supplemen.
    32. Jones, Andrew M, 1989. "A Double-Hurdle Model of Cigarette Consumption," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 4(1), pages 23-39, Jan.-Mar..
    33. Ken Clark & Stephen Drinkwater, 2007. "An Investigation Of Household Remittance Behaviour: Evidence From The United Kingdom," Manchester School, University of Manchester, vol. 75(6), pages 717-741, December.
    34. HwaJung Choi, 2007. "Are Remittances Insurance? Evidence from Rainfall Shocks in the Philippines," World Bank Economic Review, World Bank Group, vol. 21(2), pages 219-248, May.
    35. Merkle, Lucie & Zimmermann, Klaus F., 1992. "Savings, remittances, and return migration," Economics Letters, Elsevier, vol. 38(1), pages 77-81, January.
    36. Funkhouser, Edward, 1995. "Remittances from International Migration: A Comparison of El Salvador and Nicaragua," The Review of Economics and Statistics, MIT Press, vol. 77(1), pages 137-146, February.
    37. Catalina Amuedo-Dorantes & Susan Pozo, 2006. "Remittances as insurance: evidence from Mexican immigrants," Journal of Population Economics, Springer;European Society for Population Economics, vol. 19(2), pages 227-254, June.
    38. Osili, Una Okonkwo, 2007. "Remittances and savings from international migration: Theory and evidence using a matched sample," Journal of Development Economics, Elsevier, vol. 83(2), pages 446-465, July.
    39. Brown, Richard P. C., 1997. "Estimating remittance functions for Pacific Island Migrants," World Development, Elsevier, vol. 25(4), pages 613-626, January.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nahed Zghidi & Zouheir Abid, 2015. "Remittances, Economic Freedom, and Economic Growth in North African Countries," Romanian Economic Journal, Department of International Business and Economics from the Academy of Economic Studies Bucharest, vol. 18(58), pages 139-162, December.
    2. Tolciu, Andreia & Schaland, Ann-Julia & El-Cherkeh, Tanja, 2010. "Migrant entrepreneurship in Hamburg: Results from a qualitative study with Turkish entrepreneurs," HWWI Research Papers 3-22, Hamburg Institute of International Economics (HWWI).
    3. Jouini, Jamel, 2015. "Economic growth and remittances in Tunisia: Bi-directional causal links," Journal of Policy Modeling, Elsevier, vol. 37(2), pages 355-373.
    4. Giulia Bettin & Riccardo Lucchetti, 2012. "Interval regression models with endogenous explanatory variables," Empirical Economics, Springer, vol. 43(2), pages 475-498, October.
    5. Meyer, Wiebke, 2012. "Motives for remitting from Germany to Kosovo," Studies on the Agricultural and Food Sector in Transition Economies, Leibniz Institute of Agricultural Development in Transition Economies (IAMO), volume 69, number 69.
    6. Imene Guetat & Dorsaf Sridi, 2014. "Institutional Quality Effect on Remittances in the MENA Region," Working Papers 864, Economic Research Forum, revised Nov 2014.
    7. Maria Amparo Cruz-Saco & Mónika López-Anuarbe, 2013. "Familism and Social Inclusion: Hispanics in New London, Connecticut," Social Inclusion, Cogitatio Press, vol. 1(2), pages 113-125.
    8. repec:eee:riibaf:v:42:y:2017:i:c:p:94-101 is not listed on IDEAS

    More about this item

    Keywords

    Double-hurdle model; migration; remittances;

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • C24 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Truncated and Censored Models; Switching Regression Models; Threshold Regression Models

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:zbw:hwwirp:3-21. 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: (ZBW - German National Library of Economics). General contact details of provider: http://edirc.repec.org/data/hwwiide.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.