Microlevel impacts of remittances on household behavior: Viet Nam case study

This paper examines the microlevel impacts of domestic and overseas remittances on household behavior such as consumption–investment expenditure patterns and propensity of households being engaged in business activities in the case of Viet Nam. The first part summarizes previous related empirical literature conducted in the Philippines, Bangladesh, Mexico, Pakistan, Albania and Guatemala, as these developing nations share more and less similarities with Viet Nam and are among the top countries receiving remittances. Secondly, employing the ordinary least square (OLS) regression and logistic regression models and utilizing the large-scale and nationally-representative household income and expenditure survey with the technical assistance of the World Bank and United Nations Development Program, this study contributes to the ongoing discussion about the link between remittances and Vietnamese household behavior by applying a microeconometric approach. First, as expected, households in receipt of remittances spend less at the margin on the key consumption normal good: food; or food is income elastic. Second, overseas remittances are associated with increased investment in education, which generates augmented human capital and has a future social return. Third, households in receipt of overseas remittances, especially those residing in urban areas, are more likely to channel funding towards productive business investment and capital gains in comparison with those without remittances. The findings strengthen the optimistic perspective of significant positive effects of remittances on household expenditure patterns in developing economies. The OLS method employed in this research, likewise in most previous studies, may affect the results of the estimated impacts of remittances on household behavior. The paper successfully proved international evidence of the remittances and household behavior nexus in Vietnam as a case study.