Abstract
The author uses a large household data set from Guatemala to analyze how the receipt of internal remittances (from Guatemala) and international remittances (from the United States) affects the marginal spending behavior of households on various consumption and investment goods. Contrary to other studies, the author finds that households receiving remittances actually spend less at the margin on consumption-food and consumer goods and durables-than do households receiving no remittances. Instead of spending on consumption, households receiving remittances tend to spend more on investment goods, like education, health, and housing. The analysis shows that a large amount of remittance money goes into education. At the margin, households receiving internal and international remittances spend 45 and 58 percent more, respectively, on education, than do households with no remittances. These increased expenditures on education represent investment in human capital. Like other studies, the author finds that remittance-receiving households spend more at the margin on housing. These increased expenditures on housing represent a type of investment for the migrant, as well as a means for boosting local economic development by creating new income and employment opportunities for skilled and unskilled workers.
Highlights
This paper uses a large household data set from Guatemala to analyze how the receipt of internal remittances and international remittances affects the marginal spending behavior of households on various consumption and investment goods
With respect to internal remittances, when the relevant coefficients [(logEXP) and (INTREM)(logEXP)] are summed up to arrive at the full expenditure relationship, the results show that households receiving internal remittances spend less on food, and more on consumer goods/durables, housing, health and other
The results of equation (9) can be used to calculate marginal budget shares for the three groups of households for each of the six categories of expenditure. This makes it possible to identify at the margin how the receipt of internal or international remittances affects the expenditure patterns of households in Guatemala
Summary
This paper uses a large household data set from Guatemala to analyze how the receipt of internal remittances (from Guatemala) and international remittances (from the United States) affects the marginal spending behavior of households on various consumption and investment goods. Households receiving internal and international remittances spend 45 and 58 percent more, respectively, on education than do households with no remittances These increased expenditures on education represent investment in human capital. This paper finds that remittance-receiving households spend more at the margin on housing. These increased expenditures on housing represent a type of investment for the migrant as well as a means for boosting local economic development by creating new income and employment opportunities for skilled and unskilled workers. Remittances refer to the money and goods that are transmitted to households by migrant workers working outside their communities of origin These resource transfers represent one of the key issues in economic development. Adams (1991) study of how international remittances are used in rural Egypt is based on only 150 households, while Alderman’s (1996) and Adams’ (1998) studies in rural Pakistan are based on 500 households.ii Clearly, there is a need to extend the scope of these studies to examine the impact of remittances on economic development by using larger, nationally representative samples
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