Income, Consumption and Remittances: Evidence from Immigrants to Australia

35 Pages Posted: 3 Nov 2009 Last revised: 6 Nov 2009

See all articles by Giulia Bettin

Giulia Bettin

Università Politecnica delle Marche - Department of Economics

Riccardo Lucchetti

University Polytechnic of the Marches - Faculty of Economics

Alberto Zazzaro

Polytechnic University of Marche - Faculty of Economics

Date Written: November 2, 2009

Abstract

For many countries, remittance behaviour by migrants is an important component of their overall international financial flows. The empirical literature has, so far, analysed the propensity to remit as a function of migrants' socio-economic characteristics. However, no studies have fully addressed the empirical implications of remittance behaviour being determined in the broader context of migrants' labour, income and consumption allocation strategy. On the contrary, the migrant's income has almost always been treated as exogenous in this context. The aim of this study is to estimate a remittance equation that detects the main determinants of remittance behaviour while addressing endogeneity and reverse causality relationships between remittances, income, consumption and savings. Moreover, since a large share of individuals do not remit money at all, an instrumental variable variant of the double-hurdle selection model is proposed and estimated by LIML. A sending country perspective is adopted in the empirical analysis by considering the first cohort of the Longitudinal Survey of Immigrants to Australia. We find that endogeneity is substantial and that estimates obtained by the methods previously employed in the literature may be very misleading if given a behavioural interpretation. Our results confirm some theoretical predictions and shed light on others; notably, we show that "selfish" motives in remitters are at least as important as "altruistic" motives.

Keywords: migrants' remittances, double-hurdle models

JEL Classification: F24, F22

Suggested Citation

Bettin, Giulia and Lucchetti, Riccardo and Zazzaro, Alberto, Income, Consumption and Remittances: Evidence from Immigrants to Australia (November 2, 2009). Available at SSRN: https://ssrn.com/abstract=1498325 or http://dx.doi.org/10.2139/ssrn.1498325

Giulia Bettin (Contact Author)

Università Politecnica delle Marche - Department of Economics ( email )

Piazzale Martelli 8
Ancona, 18039
Italy
+39 071 2207079 (Phone)
+39 071 2207102 (Fax)

Riccardo Lucchetti

University Polytechnic of the Marches - Faculty of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy

Alberto Zazzaro

Polytechnic University of Marche - Faculty of Economics ( email )

Piazzale Martelli, 8
60121 Ancona
Italy

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