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Estimating Bilateral Remittances in a Macroeconomic Framework: Evidence from top Remittance-Receiving Countries

Keerti Mallela, Sunny Kumar Singh and Archana Srivastava

Studies in Microeconomics, 2020, vol. 8, issue 1, 95-118

Abstract: Abstract Based on Ratha and Shaw’s (2007) model for estimating bilateral remittances, this study attempts to develop a new method for computing bilateral and aggregate remittances for the top five remittances-receiving countries for the period 2010-16. Considering tempered altruism as a motive for sending remittances, we develop an analytical framework based on the lifecycle hypothesis of saving to compute bilateral and aggregate remittances. We compare our bilateral and aggregate remittance values with the World Bank's values based on Ratha and Shaw’s (2007) model. Our analytical framework seems to be an improvement over the Ratha and Shaw model in several ways. First, our model considers several theoretical aspects of motivations to remit like saving, investment and wealth accumulation. Second, it addresses the issues of underestimation and overestimation, i.e. inaccuracy, of bilateral and aggregate remittances in various ways (for instance, by considering GDP per capita instead of GNI per capita we control for overestimation of remittances whereas by considering every kind of migrants from all destination countries we control for underestimation) and mitigates the probability of both these issues through the proposed model. Third, it compares regional bilateral remittances between the new model and the Ratha and Shaw model, delving on the reasons behind underestimation and overestimation, i.e. inaccuracy. We conclude that our analytical model has the potential to provide a general framework for computing bilateral and aggregate remittances which can be used for most of the remittance-receiving countries.

Keywords: Altruist motive; bilateral remittances; lifecycle hypothesis of saving; saving and investment (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1177/2321022220924306

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