Comparative effects of migrants' remittances on composition of recipient household income in two small, island economies

Richard Brown and Gareth Leeves ()

Applied Economics, 2011, vol. 43, issue 27, 3965-3976

Abstract: We use unique household survey data from Fiji and Tonga to estimate and compare the combined impact of migration and remittances on the composition of household income. A two-step methodology is followed employing a migration prediction model followed by the estimation of a Three Stage Least Squares (3SLS) remittances and income equation system. We find that remittances contribute to growth in productive capital and entrepreneurial activity in the longer-established migrant economy, but have yet to impact on business activity in the more recently remittances-oriented economy, despite it having a more developed, market economy. In the latter case, remittances seem more linked to supporting consumption through supplementing low wage income. These findings suggest that the duration and intensity of remittance-driven migration, and the structure of economic activity within a community are important in understanding the influences of migration and remittances on household resource allocation and production decisions.

Date: 2011
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DOI: 10.1080/00036841003742611

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