Do Remittances Increase Household Indebtedness: Evidence from a Cambodian Household Survey

Chan Mono Oum, Gazi Hassan () and Mark Holmes ()

Working Papers in Economics from University of Waikato

Abstract: This paper examines the direct impact of remittances on household debt performance and levels of indebtedness using survey data from 422 households in the northern part of Cambodia. We employ the Two-Step Heckman selection model to alleviate concerns regarding the endogeneity issues derived from self-selection bias, reverse causation, and omitted variable bias. The Tobit model is then employed to estimate household debt performance and the indebtedness impact of remittances. We first show that remittances are viewed as transitory incomes tending to decay as a migrant's length of stay outside the household increases. In the second stage of estimation, remittances positively affect household debt performance, particularly in low debt performance households. Remittances are also found to reduce household indebtedness in the recipient households. Because remittances contribute to reducing household indebtedness, which is a critical component in the financial system, policy responses should be targeted toward lowering the actual cost of sending remittances and thereby enabling migrant workers, and their left-behind household the ability to access formal and digitalized platforms in order to sending and receiving remittances.

Keywords: remittances; household indebtedness; debt performance; Cambodia (search for similar items in EconPapers)
JEL-codes: D15 F24 G51 R23 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2022-01-12
New Economics Papers: this item is included in nep-dev, nep-fdg, nep-his, nep-mig and nep-sea
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://repec.its.waikato.ac.nz/wai/econwp/2202.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wai:econwp:22/02

Access Statistics for this paper

More papers in Working Papers in Economics from University of Waikato Private Bag 3105, Hamilton, New Zealand, 3240. Contact information at EDIRC.
Bibliographic data for series maintained by Geua Boe-Gibson ().