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Are remittances a substitute for credit? Carrying the financial burden of health shocks in national and transnational households

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  • Ambrosius, Christian

Abstract

The assumption that remittances are a substitute for credit has been an implicit or explicit theoretical foundation of many empirical studies on remittances. This paper directly tests this assumption by comparing the response to health-related shocks among national and transnational households using panel data from Mexico for 2002 and 2005. While the occurrence of serious health shocks that required hospital treatment doubled the average debt burden of exposed households compared to the control group, households with nuclear family members (a parent, child, or spouse) in the US did not increase their debts due to health shocks. This finding is consistent with the view that remittances respond to households' demand for financing emergencies and make them less reliant on debt-financing.

Suggested Citation

  • Ambrosius, Christian, 2012. "Are remittances a substitute for credit? Carrying the financial burden of health shocks in national and transnational households," Discussion Papers 2012/9, Free University Berlin, School of Business & Economics.
    • Handle: RePEc:zbw:fubsbe:20129
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    More about this item

    JEL classification:

    • F24 - International Economics - - International Factor Movements and International Business - - - Remittances
    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • I15 - Health, Education, and Welfare - - Health - - - Health and Economic Development
    • O12 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development

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