Abstract
Using a nationally representative data set, this study examines the impact of migrant remittances on expenditure pattern and intra-household decision making process of rural households in Sri Lanka. The impact was estimated using fractional logit models within the Engel curve framework. Estimating the fractional logit models, we find evidence that there are strong differences in the impact on expenditure patterns of male and female household heads with the receipt of internal remittances whereas effect of international remittances on changing the expenditure pattern and the intra-household resource allocation is negligible. More specifically male household heads allocate less on education and more on ad hoc purchases, entertainment and transport expenditure, while female household heads allocate more on food expenditure with the receipt of internal remittances. Moreover, remitters’ contribution for the ad hoc purchases, entertainment and transport expenditure increases with their presence as a migrant to the household head. Overall, the study concludes that remittances are not directed towards the productive investments or human capital formation with the receipt of remittances in male headed or female headed households of rural sector of Sri Lanka.
Highlights
Migration and remittances play a significant role in economies of developing nations in the world especially affecting social wellbeing of those nations
Secondary data compiled under the Household Income and Expenditure Survey (HIES 2009/2010) conducted by Department of Census and Statistics (DCS) in Sri Lanka was utilized for the study
The effect of remittances on rural household expenditure pattern and the impact of gender of the household head and remitter on expenditure pattern were estimated by using HIES data
Summary
Migration and remittances play a significant role in economies of developing nations in the world especially affecting social wellbeing of those nations. The impact is enormous such that in some countries contribution by remittances to Gross Domestic Product (GDP) is more than 40% (World Bank, 2015) and remittances even exceed Foreign Direct Investment (FDI) (Ratha, 2005; Yang, 2011). Sri Lanka has experienced a large movement of rural labor, which is predominantly agricultural, seeking employment opportunities in Export Processing Zones (EPZ) and outside the country since economic liberalization taken place in 1977. This internal and international migration of household members especially from rural sector has created significant impacts on reducing agricultural production and creating rural agricultural labor scarcity
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