How Do Migrant Remittances Affect Household Consumption Patterns?

32 Pages Posted: 1 Feb 2015

See all articles by Junaid Ahmed

Junaid Ahmed

University of Goettingen (Gottingen)

Mazhar Mughal

Pau Business School; Economics Department, University of Pau

Date Written: January 30, 2015

Abstract

This study analyzes differential consumption patterns of Pakistani migrant households resulting from foreign and domestic remittances. Using the Working-Leser model and a number of matching techniques, we analyze a large representative household survey carried out in 2010-2011 to compare various expenditure categories of recipient and non-recipient households across different income brackets. Findings show that foreign remittances lead to significant consumption changes. Contrary to the widely-held view, remittances do not raise the budget share on consumer goods and recreation, while the allocation on education increases substantially. Households receiving domestic remittances also show a strong focus on human capital with significantly higher shares of health and education. Recipients of international transfers living below one dollar a day spend proportionally more on food compared with their non-recipient counterparts, whereas their education and health budget shares are not dissimilar. We find that migrant households perceive remittances as a mainly transient, not fully fungible source of income.

Keywords: Expenditure; Consumption patterns; International remittances; Domestic remittances; Pakistan

JEL Classification: F22; O12; O15

Suggested Citation

Ahmed, Junaid and Mughal, Mazhar, How Do Migrant Remittances Affect Household Consumption Patterns? (January 30, 2015). Available at SSRN: https://ssrn.com/abstract=2558094 or http://dx.doi.org/10.2139/ssrn.2558094

Junaid Ahmed (Contact Author)

University of Goettingen (Gottingen) ( email )

Platz der Gottinger Sieben 3
Gottingen, D-37073
Germany

Mazhar Mughal

Pau Business School ( email )

Academic field, Avenue du Doyen Poplawski
Pau, 64012
France

Economics Department, University of Pau ( email )

Avenue du Doyen Poplawski
64000 Pau
France

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