Remittances and Relative Concerns in Rural China

40 Pages Posted: 4 Sep 2015

See all articles by Alpaslan Akay

Alpaslan Akay

IZA Institute of Labor Economics

Olivier Bargain

IZA Institute of Labor Economics; University College Dublin (UCD)

Corrado Giulietti

Department of Economics

Juan Robalino

Universidad de Costa Rica - School of Economics

Klaus F. Zimmermann

Harvard University; German Institute for Economic Research (DIW Berlin); University of Bonn; Centre for Economic Policy Research (CEPR)

Abstract

The paper investigates the impact of remittances on the relative concerns of households in rural China. Using the Rural to Urban Migration in China (RUMiC) dataset we estimate a series of well-being functions to simultaneously explore the relative concerns with respect to income and remittances. Our results show that although rural households experience substantial utility loss due to income comparisons, they gain utility by comparing their remittances with those received by their reference group. In other words, we find evidence of a "status-effect" with respect to income and of a "signal-effect" with respect to remittances. The magnitudes of these two opposite effects are very similar, implying that the utility reduction due to relative income is compensated by the utility gain due to relative remittances. This finding is robust to various specifications, controlling for the endogeneity of remittances and selective migration, as well as a measure of current migrants' net remittances calculated using counterfactual income and expenditures.

Keywords: positional concerns, remittances, subjective well-being

JEL Classification: C90, D63

Suggested Citation

Akay, Alpaslan and Bargain, Olivier and Giulietti, Corrado and Robalino, Juan and Zimmermann, Klaus F., Remittances and Relative Concerns in Rural China. IZA Discussion Paper No. 9163. Available at SSRN: https://ssrn.com/abstract=2655112

Alpaslan Akay (Contact Author)

IZA Institute of Labor Economics ( email )

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

Olivier Bargain

IZA Institute of Labor Economics ( email )

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

University College Dublin (UCD) ( email )

Belfield, Dublin 4 4
Ireland
+353 1 716 8357 (Phone)
+353 1 283 0068 (Fax)

HOME PAGE: http://www.ucd.ie/economics/staff/obargain/obargain.htm

Corrado Giulietti

Department of Economics ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Juan Robalino

Universidad de Costa Rica - School of Economics ( email )

San Jose
Costa Rica

Klaus F. Zimmermann

Harvard University ( email )

1875 Cambridge Street
Cambridge, MA 02138
United States

German Institute for Economic Research (DIW Berlin)

Mohrenstra├če 58
Berlin, 10117
Germany

University of Bonn

Postfach 2220
Bonn, D-53012
Germany

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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