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Do Remittances Influence Household Investment Decisions? Evidence from Sub-Saharan Africa

Md Shahadath Hossain () and Adesola Sunmoni
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Md Shahadath Hossain: Department of Economics, Binghamton Univeristy

No em-dp2021-04, Economics Discussion Papers from Department of Economics, University of Reading

Abstract: The impact of remittances on left behind households is ambiguous a priori due to competing income and substitution effects. Similarly, empirical evidence in the literature is inconclusive. We offer new evidence on the effect of remittances on household investment decisions. We enrich our analysis by considering different types of capital investment and remittance sources. We use data from the World Bank’s Migration and Remittances Household Survey, a recursive bivariate probit model, and instrumental variables approach to account for endogeneity concerns. We find that remittance-receiving households in sub-Saharan Africa are more likely to invest in human and social capital compared to non-remittance receiving households. However, there is substantial variation in investment behaviour across countries. We also show the heterogeneous effect of remittance sources on investment behaviour. Our study is relevant for policymakers seeking to maximise the impact of remittances to foster local economic opportunities.

Keywords: Remittances; Investments; Africa; Physical capital; Human capital; Social Capital (search for similar items in EconPapers)
JEL-codes: F22 F24 J61 O15 O24 (search for similar items in EconPapers)
Pages: 32 pages
Date: 2021-01-30
New Economics Papers: this item is included in nep-dev and nep-mig
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