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The economic impact of international remittances on poverty and household consumption and investment in Indonesia

Author

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  • Adams, Richard H., Jr.
  • Cuecuecha, Alfredo

Abstract

This paper analyzes the impact of international remittances on poverty and household consumption and investment using panel data (2000 and 2007) from the Indonesian Family Life Survey. Three key findings emerge. First, using an instrumental variables approach to control for selection and endogeneity, it finds that international remittances have a large statistical effect on reducing poverty in Indonesia. Second, households receiving remittances in 2007 spent more at the margin on one key consumption good -- food -- compared with what they would have spent on this good without the receipt of remittances. Third, households receiving remittances in 2007 spent less at the margin on one important investment good -- housing -- compared with what they would have spent on this good without the receipt of remittances. Households receiving international remittances in Indonesia are poorer than other types of households, and thus they tend to spend their remittances at the margin on consumption rather than investment goods.

Suggested Citation

  • Adams, Richard H., Jr. & Cuecuecha, Alfredo, 2010. "The economic impact of international remittances on poverty and household consumption and investment in Indonesia," Policy Research Working Paper Series 5433, The World Bank.
    • Handle: RePEc:wbk:wbrwps:5433
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    References listed on IDEAS

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    1. Adams, Richard Jr. & Page, John, 2005. "Do international migration and remittances reduce poverty in developing countries?," World Development, Elsevier, vol. 33(10), pages 1645-1669, October.
    2. World Bank, 2008. "The Migration and Remittances Factbook 2008," World Bank Publications - Books, The World Bank Group, number 6383.
    3. Adams, Richard H, Jr, 1998. "Remittances, Investment, and Rural Asset Accumulation in Pakistan," Economic Development and Cultural Change, University of Chicago Press, vol. 47(1), pages 155-173, October.
    4. Adams Jr., Richard H. & Cuecuecha, Alfredo, 2010. "Remittances, Household Expenditure and Investment in Guatemala," World Development, Elsevier, vol. 38(11), pages 1626-1641, November.
    5. Adams, Richard H., Jr. & Cuecuecha, Alfredo & Page, John, 2008. "The impact of remittances on poverty and inequality in Ghana," Policy Research Working Paper Series 4732, The World Bank.
    6. 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.
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