Social Relations and Remittances: Evidence from Canadian Micro Data

Abstract

This paper models transfers outside the household for both the Canadian- born and foreign-born Canadian populations in a traditional expenditure framework with an unique composition of goods to illustrate the special motivations to remit by immigrants. We theorise that remittances to persons outside the households represent transfers to maintain social relations with relatives and friends and religious/charitable remittances are expenditures which foster group membership. Using Canadian survey data we estimate transfer functions as part of a larger expenditure system and calculate Engel elasticities for remittances to persons and to charities by both the Canadian and foreign-born populations. We conclude that expenditures to enhance social relations with relatives and friends (i.e. remittances to persons) are a normal good for recent Asian immigrants and a luxury good for all other immigrants and Canadians. Moreover, Asian households are the only ones that remit significantly more of their total expenditures to persons upon arrival, compared to the Canadian reference group, and their remittance behaviour does not converse to that of Canadian-born over time. This latter fact indicates strong cultural differences within the remitting households, most probably due to the fact that Asian households have stronger social ties to their extended family. Finally, with the exception of lower income North American and European immigrant households, all other immigrant groups and Canadians generally consider group membership contributions (i.e. charitable remittances) as a greater necessity than inter-household transfers.