The Economic Impact of International Remittances on Poverty and Household Consumption and Investment in Indonesia

47 Pages Posted: 20 Apr 2016

See all articles by Richard H. Adams, Jr.

Richard H. Adams, Jr.

World Bank - Development Research Group (DECRG)

Alfredo Cuecuecha

Universidad Iberoamericana

Date Written: September 1, 2010

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.

Keywords: Population Policies, Debt Markets, Remittances, Small Area Estimation Poverty Mapping, Rural Poverty Reduction

Suggested Citation

Adams, Jr., Richard H. and Cuecuecha, Alfredo, The Economic Impact of International Remittances on Poverty and Household Consumption and Investment in Indonesia (September 1, 2010). World Bank Policy Research Working Paper No. 5433, Available at SSRN: https://ssrn.com/abstract=1683904

Richard H. Adams, Jr. (Contact Author)

World Bank - Development Research Group (DECRG) ( email )

1818 H. Street, N.W.
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Washington, DC 20433
United States

Alfredo Cuecuecha

Universidad Iberoamericana ( email )

Prol. Paseo de la Reforma, #880
Lomas de Santa Fe
Mexico, Distrito Federal 01210
Mexico

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