Remittances and Household Welfare: A Case Study of Bangladesh

35 Pages Posted: 2 Jun 2010

See all articles by Selim Raihan

Selim Raihan

University of Dhaka

Guntur Sugiyarto

Asian Development Bank

H. Khondker Bazlul

University of Dhaka

Shikha Jha

Asian Development Bank

Date Written: December 2009

Abstract

This paper examines the impacts of international remittances on household consumption expenditure and poverty in Bangladesh using computable general equilibrium modeling of the Bangladesh economy and microeconometric analysis at the household level. The former assesses the economic effects and distributional implications of remittances at the macro, sectoral, and household group levels, while the latter shows the association between remittances and household consumption expenditure, including poverty status. The first set of results shows that remittances have positive effects on the economy and they reduce poverty. The paper estimates that 1.7 out of the 9 percentage point reduction in the headcount ratio during 2000–2005 was due to the growth in remittances. A closer look at the household level further reveals the positive and significant impacts of remittances on the household’s food and housing-related expenditures. The impacts on education and health expenditures are also positive but insignificant. This implies a limited role of remittances in creating domestic demand for rebalancing growth and in developing human capital necessary to achieve the MDGs. However, results based on logit regression suggest that the probability of the household becoming poor decreases by 5.9% if it receives remittances, which further confirms the positive impact of remittances. Given that migration and remittances also bring costs to the society, the study findings call for policies to maximize their benefits. This includes attracting more remittances through formal channels and increasing their productive use.

Keywords: International migration and remittances, Household welfare, Poverty, CGE Model, Microeconometrics, Bangladesh

Suggested Citation

Raihan, Selim and Sugiyarto, Guntur and Bazlul, H. Khondker and Jha, Shikha, Remittances and Household Welfare: A Case Study of Bangladesh (December 2009). Asian Development Bank Economics Working Paper No. 189. Available at SSRN: https://ssrn.com/abstract=1618142 or http://dx.doi.org/10.2139/ssrn.1618142

Selim Raihan (Contact Author)

University of Dhaka ( email )

University of Dhaka
Ramna, Dhaka, 1000
Bangladesh

Guntur Sugiyarto

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

H. Khondker Bazlul

University of Dhaka ( email )

University of Dhaka
Ramna, Dhaka, 1000
Bangladesh

Shikha Jha

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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