Remittances and household spending strategies: evidence from the Life in Kyrgyzstan Study, 2011–2013

Abstract

ABSTRACT Globalised labour migration and remittances can help alleviate household poverty and provide supplemental income in many countries. Kyrgyzstan, like other Central Asian countries, has experienced dramatic geopolitical changes, economic reform, and rapid demographic shifts in the post-Soviet-Union era. Based on measurements of GDP, it is one of the most remittance-dependent countries in the world. This study uses data from the Life in Kyrgyzstan Study collected from 2011 to 2013 to break down household budgets into eight consumption categories as part of a detailed analysis of how varying remittance receipt is related to household spending. We address two methodological concerns: (1) the endogeneity of remittances and (2) population heterogeneity. In so doing, we find remittances have limited effects on household spending – while changes in remittances do yield small changes on the budget shares of food and medical expenses, no effects were found on other consumption shares. These results suggest that households in Kyrgyzstan may take remittances as permanent income and proportionally alter consumption shares along with changes in remittances. By focusing on a country whose GDP relies heavily on remittances, the findings increase our understanding of how remittances affect spending at the household level.