Remittances and Income Smoothing

17 Pages Posted: 21 Mar 2011

See all articles by Catalina Amuedo-Dorantes

Catalina Amuedo-Dorantes

San Diego State University - Department of Economics; IZA Institute of Labor Economics

Susan Pozo

Western Michigan University - Department of Economics

Abstract

Due to inadequate savings and binding borrowing constraints, income volatility can make households in developing countries particularly susceptible to economic hardship. We examine the role of remittances in either alleviating or increasing household income volatility using Mexican household level data over the 2000 through 2008 period. We correct for reverse causality and endogeneity and find that while income smoothing does not appear to be the main motive for sending remittances in a non-negligible share of households, remittances do indeed smooth household income on average. Other variables surrounding income volatility are also considered and evaluated.

Keywords: remittances, income smoothing

JEL Classification: F22, O15, O54

Suggested Citation

Amuedo-Dorantes, Catalina and Pozo, Susan, Remittances and Income Smoothing. IZA Discussion Paper No. 5568. Available at SSRN: https://ssrn.com/abstract=1790679

Catalina Amuedo-Dorantes (Contact Author)

San Diego State University - Department of Economics ( email )

5500 Campanile Drive
San Diego, CA 92182
United States
619-594-1663 (Phone)
619-594-5062 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

Susan Pozo

Western Michigan University - Department of Economics ( email )

1903 West Michigan Avenue
Kalamazoo, MI 49008
United States
269-387-5553 (Phone)
269-387-5637 (Fax)

HOME PAGE: http://homepages.wmich.edu/~pozo/

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