When Do Remittances Facilitate Asset Accumulation? The Importance of Remittance Income Uncertainty

Catalina Amuedo-Dorantes and Susan Pozo

No 7983, IZA Discussion Papers from Institute of Labor Economics (IZA)

Abstract: A sizable literature has concluded that remittances impact the expenditure patterns of households. We explore how the uncertainty of remittance income inflows affects the accumulation of human, physical and financial assets of Mexican households, while accounting for the level of transfers from family abroad. We find that both the level and the uncertainty of remittance inflows raise asset accumulation among remittance-receiving households. Specifically, as predicted by the permanent income hypothesis and theories of precautionary saving, a one standard deviation increase in the uncertainty of remittance income raises the likelihood of household spending on asset accumulation by about 2 percentage points while raising the share of household expenditures on asset accumulation by 4 to 9 percent. These results suggest that both the level and the predictability of remittance income should be given full consideration in the analysis of household expenditure patterns and in the design of policies to leverage the most out of remittance inflows into developing economies.

Keywords: household expenditures; uncertainty; international remittances; asset accumulation; Mexico (search for similar items in EconPapers)
JEL-codes: F22 J20 (search for similar items in EconPapers)
Pages: 39 pages
Date: 2014-02
New Economics Papers: this item is included in nep-dev, nep-int and nep-ltv
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

Published - published as 'Remittance income uncertainty and asset accumulation' in: IZA Journal of Labor & Development, 2014, 3:3

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