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State dependence and unobserved heterogeneity in a double hurdle model for remittances: evidence from immigrants to Germany

Giulia Bettin (), Riccardo (Jack) Lucchetti () and Claudia Pigini ()

No 127, Mo.Fi.R. Working Papers from Money and Finance Research group (Mo.Fi.R.) - Univ. Politecnica Marche - Dept. Economic and Social Sciences

Abstract: The empirical modelling of remitting behaviour has been the object of a considerable amount of micro-level literature. The increasing availability of panel datasets makes it possible to explore the persistence in transfer decisions as a result of intertemporal choices, that may be consistent with several motivations to remit. Building a dynamic model with panel data poses the additional problem of dealing properly with permanent unobserved heterogeneity; moreover, the specific censored nature of international transfers has to be accounted for as well. In this paper, we propose a dynamic, random-effects double hurdle model for remittances: we combine the Maximum Likelihood estimator of the traditional double hurdle model for cross-section data (Jones, 1989) with the approach put forward by Heckman (1981b) for dealing with state dependence and unobserved heterogeneity in a non-linear setting. Our empirical evidence based on the German SOEP dataset suggests that there is significant state dependence in remitting behaviour consistent with migrants. intertemporal allocation of savings; at the same time, transaction costs are likely to affect the steadiness of transfers over time.

Keywords: Migration; Remittances; State dependence; Double hurdle; Intertemporal choices (search for similar items in EconPapers)
JEL-codes: F22 F24 C23 C34 C35 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cse, nep-ecm, nep-eur and nep-mig
Date: 2016-07
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