IDEAS home Printed from https://ideas.repec.org/p/hhs/lunewp/2011_001.html
   My bibliography  Save this paper

International Remittances – A proposal how to test hypotheses about determinants of remittances with macroeconomic time series

Author

Listed:

Abstract

We study the determinants of remittances to developing countries at different time horizons. Remittances to developing countries nowadays exceed official development assistance and constitute a significant fraction of the disposable income of many households in developing countries. Different hypotheses suggest that remittances are often sent to compensate for low incomes, which may impose a downward bias when estimating their effects on the economic development (e.g. growth, poverty and consumption) in recipient countries. Two popular hypotheses about the causes of remittances are the altruism and insurance hypothesis. Both hypotheses suggest that remittances are sent to compensate for short-run economic declines, but the altruism hypotheses also predict that remittances should diminish gradually over time as the economic development in the receiving countries proceeds and the need for outside assistance decreases. Hence, the altruism hypothesis predicts a negative correlation between the economic conditions in the receiving countries and remittances in the long-run and the short-run, while the insurance hypothesis only predicts a negative relationship in the short run. We can thus test which hypothesis that is best supported the data by studying the correlation between remittances and consumption in receiving countries at different time horizons. For this purpose we use a macroeconomic panel with consumption and remittances data from 50 low and middle income economies between 1980 and 2006. We estimate Keynesian consumption functions with GDP and remittances per capita as explanatory variables for the full panel and for different subpanels. The data is decomposed into different time horizons using a maximal overlap discrete wavelet transform. We are not aware of any study which uses similar econometric techniques to test different hypotheses about the underlying causes of remittances. Our evidence predominantly supports a negative long-run relationship, which favours the altruism over the insurance hypothesis.

Suggested Citation

  • Karpestam, Peter & Andersson, Fredrik N G, 2011. "International Remittances – A proposal how to test hypotheses about determinants of remittances with macroeconomic time series," Working Papers 2011:1, Lund University, Department of Economics.
    • Handle: RePEc:hhs:lunewp:2011_001
    as

    Download full text from publisher

    File URL: http://project.nek.lu.se/publications/workpap/papers/WP11_1.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. repec:dau:papers:123456789/10842 is not listed on IDEAS
    2. Flore Gubert, 2002. "Do Migrants Insure Those who Stay Behind? Evidence from the Kayes Area (Western Mali)," Oxford Development Studies, Taylor & Francis Journals, vol. 30(3), pages 267-287.
    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. Farid Makhlouf & Refk Selmi, 2023. ""From Aspirations for Climate Action to the Reality of Climate Disasters": Can Migrants Play Key Role in Disaster Response?," Working Papers hal-04137400, HAL.
    2. Hathroubi, Salem & Aloui, Chaker, 2016. "On interactions between remittance outflows and Saudi Arabian macroeconomy: New evidence from wavelets," Economic Modelling, Elsevier, vol. 59(C), pages 32-45.
    3. Farid Makhlouf & Refk Selmi, 2024. "‘From aspirations for climate action to the reality of climate disasters’: Can remittances play key role in disaster response?," The World Economy, Wiley Blackwell, vol. 47(8), pages 3487-3510, August.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hajer Habib, 2023. "Remittances and Labor Supply: Evidence from Tunisia," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 14(2), pages 1870-1899, June.
    2. Mr. Jacques Bouhga-Hagbe, 2004. "A Theory of Workers' Remittances with An Application to Morocco," IMF Working Papers 2004/194, International Monetary Fund.
    3. Robert E.B. Lucas, 2007. "Migration and rural development," The Electronic Journal of Agricultural and Development Economics, Food and Agriculture Organization of the United Nations, vol. 4(1), pages 99-122.
    4. Catia Batista & Janis Umblijs, 2016. "Do migrants send remittances as a way of self-insurance?," Oxford Economic Papers, Oxford University Press, vol. 68(1), pages 108-130.
    5. Molina Millán, Teresa, 2015. "Regional Migration, Insurance and Economic Shocks: Evidence from Nicaragua," IZA Discussion Papers 9494, Institute of Labor Economics (IZA).
    6. Grimm, Michael & Hartwig, Renate & Lay, Jann, 2017. "Does forced solidarity hamper investment in small and micro enterprises?," Journal of Comparative Economics, Elsevier, vol. 45(4), pages 827-846.
    7. Fromentin, Vincent & Leon, Florian, 2019. "Remittances and credit in developed and developing countries: A dynamic panel analysis," Research in International Business and Finance, Elsevier, vol. 48(C), pages 310-320.
    8. Kwame Adjei‐Mantey & Millicent O. Awuku & Ruby V. Kodom, 2023. "Revisiting the determinants of food security: Does regular remittance inflow play a role in Ghanaian households? A disaggregated analysis," Regional Science Policy & Practice, Wiley Blackwell, vol. 15(6), pages 1132-1146, August.
    9. Sezard Timbi & Mohammadou Nourou & Zedou Abdala, 2024. "Governance Mediates the Effect of Remittances on Financial Inclusion in Sub-Saharan Africa," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(1), pages 2874-2894, March.
    10. repec:dau:papers:123456789/5559 is not listed on IDEAS
    11. Hagen-Zanker, Jessica, 2010. "Modest expectations: Causes and effects of migration on migrant households in source countries," MPRA Paper 29507, University Library of Munich, Germany.
    12. Mr. Sanjeev Gupta & Ms. Catherine A Pattillo & Ms. Smita Wagh, 2007. "Impact of Remittances on Poverty and Financial Development in Sub-Saharan Africa," IMF Working Papers 2007/038, International Monetary Fund.
    13. Imad El Hamma, 2018. "Migrant Remittances and Economic Growth: The Role of Financial Development and Institutional Quality," Economie et Statistique / Economics and Statistics, Institut National de la Statistique et des Etudes Economiques (INSEE), issue 503-504, pages 123-142.
    14. Couharde, Cécile & Generoso, Rémi, 2015. "The ambiguous role of remittances in West African countries facing climate variability," Environment and Development Economics, Cambridge University Press, vol. 20(4), pages 493-515, August.
    15. Farai Jena, 2016. "The remittance behaviour of Kenyan sibling migrants," IZA Journal of Migration and Development, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 5(1), pages 1-19, December.
    16. Yoshito Takasaki, 2013. "Do natural disasters beget fraud victimization?: Unrealized coping through labor migration among the poor," Tsukuba Economics Working Papers 2013-002, Faculty of Humanities and Social Sciences, University of Tsukuba.
    17. repec:hal:cesptp:halshs-00826999 is not listed on IDEAS
    18. Akim, Al-Mouksit & Ayivodji, Firmin & Kouton, Jeffrey, 2024. "Food security and the COVID-19 employment shock in Nigeria: Any ex-ante mitigating effects of past remittances?," Food Policy, Elsevier, vol. 122(C).
    19. Alpaslan Akay & Corrado Giulietti & Juan Robalino & Klaus Zimmermann, 2014. "Remittances and well-being among rural-to-urban migrants in China," Review of Economics of the Household, Springer, vol. 12(3), pages 517-546, September.
    20. Okayo Alphonsine COULIBALY, 2016. "Les Motivations Microéconomiques Des Transferts De Fonds Au Burkina Faso : La Culture Est-Elle Déterminante ?," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 43, pages 187-208.
    21. Mduduzi Biyase & Fiona Tregenna, 2016. "Determinants of remittances in South Africa," SALDRU Working Papers 176, Southern Africa Labour and Development Research Unit, University of Cape Town.
    22. Cox-Edwards, Alejandra & Rodríguez-Oreggia, Eduardo, 2009. "Remittances and Labor Force Participation in Mexico: An Analysis Using Propensity Score Matching," World Development, Elsevier, vol. 37(5), pages 1004-1014, May.

    More about this item

    Keywords

    Remittances; Altruism; Insurance Hypothesis;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances

    NEP fields

    This paper has been announced in the following NEP Reports:

    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:hhs:lunewp:2011_001. See general information about how to correct material in RePEc.

    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 bibliographic 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Iker Arregui Alegria (email available below). General contact details of provider: https://edirc.repec.org/data/delunse.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.