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Mental Accounting and Remittances: A Study of Malawian Households

Author

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  • Davies, Simon
  • Easaw, Joshy
  • Ghoshray, Atanu

Abstract

In this paper we use a behavioural approach to studying household consumption behaviour in Malawi. In particular we are interested to know whether households use mental accounting when consuming different categories of good. It is useful for assessing the impact of remittances on household consumption behaviour. We use 1998 cross-sectional data to find the following key results: (i) mental accounting systems are in operation. Remittance income exhibits a high marginal propensity to save, (ii) household income influences consumption habits, (iii) receipt of remittance income impacts on saving and spending habits. This is in line with the theory of remittances and corresponding mental accounting theory, and, finally, (iv) both remittances and loans are used for consumption smoothing and investment purposes.

Suggested Citation

  • Davies, Simon & Easaw, Joshy & Ghoshray, Atanu, 2006. "Mental Accounting and Remittances: A Study of Malawian Households," MPRA Paper 3603, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:3603
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    References listed on IDEAS

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    Cited by:

    1. Davies, Simon & Davey, James, 2007. "A regional multiplier approach to estimating the impact of cash transfers: The case of cash aid in rural Malawi," MPRA Paper 3724, University Library of Munich, Germany.

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    More about this item

    Keywords

    Remittances; Household Behaviour; Consumer Economics; Economic Development; Africa; Malawi;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D1 - Microeconomics - - Household Behavior
    • O15 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Economic Development: Human Resources; Human Development; Income Distribution; Migration

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