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Remittances, Liquidity Constraints and Human Capital Investments in Ecuador

Carla Calero (), Arjun Bedi and Robert Sparrow ()
Additional contact information
Carla Calero: Inter-American Development Bank

No 3358, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: Over the last decade Ecuador has experienced a strong increase in financial transfers from migrated workers, amounting to 6.4 percent of GDP and 31.5 percent of total exports of goods and services in 2005. This paper investigates how remittances via trans-national networks affect human capital investments through relaxing resource constraints and facilitate households in consumption smoothing by reducing vulnerability to economic shocks. In particular, we explore the effects of remittances on school enrolment and child work in Ecuador. Identification relies on instrumental variables, exploiting information on source countries of remittances and regional variation in the availability of bank offices that function as formal channels for sending remittances. Our results show that remittances increase school enrolment and decrease incidence of child work, especially for girls and in rural areas. Furthermore, we find that aggregate shocks are associated with increased work activities, while remittances are used to finance education when households are faced with these shocks. This suggests that liquidity constraints and vulnerability to covariate risk are especially relevant in rural areas, as it affects household’s investments in human capital of school age children. In this context both child labour supply and transnational remittances serve as coping mechanisms.

Keywords: remittances; trans-national networks; education; migration; child labour; Ecuador (search for similar items in EconPapers)
Pages: 37 pages
Date: 2008-02
New Economics Papers: this item is included in nep-dev, nep-edu, nep-hrm, nep-lam and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (47)

Published - published in: World Development, 2009, 37 (6), 1143-1154

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Journal Article: Remittances, Liquidity Constraints and Human Capital Investments in Ecuador (2009) Downloads
Working Paper: Remittances, liquidity constraints and human capital investments in Ecuador (2008) Downloads
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