Munich Personal RePEc Archive

The Impact of Remittances on Household: An Empirical Study on the Bangladeshi Diaspora in United Kingdom

Kazi Abdul, Mannan and A.O, Krueger (2004): The Impact of Remittances on Household: An Empirical Study on the Bangladeshi Diaspora in United Kingdom. Published in: Russian Journal of Economic and Social Science , Vol. 12, No. 2 (15 December 2004): pp. 48-73.

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Abstract

This paper, the Working-Lesser model has been applied to estimate the impact of remittances on households’ expenditure patterns in Bangladesh. In order to investigate the expenditure patterns, we estimated the regressions for three different categories. The dataset which has used to examine the impact of remittances on household expenditure behaviour was obtained from the Household Survey in Sylhet Division in Bangladesh during the period January to June 2004. Given the specificities in the data, that is, the all positive numbers in current consumption variable and the presence of a considerable number of zero values in the durable goods and education categories, two different estimation methods have been used, that is OLS and Tobit. Regarding the factors affecting the expenditure patterns, the results suggested that as income in the household increases the share of expenditure in current consumption decreases. The effect of income is the opposite on the share of durable goods and education. The age-current consumption relationship is non-linear suggesting a U-shaped function and the lowest point being at the age. Home ownership increases the share of expenditure on current consumption and durable goods, while it decreases the category of education, perhaps reflecting some sort of economic security compared to their counterparts. The estimates suggest that the changes in income of households who receive remittances are spent differently compared to non-recipients across expenditure categories. However, years of migration are not found to affect expenditure patterns. Overall, the findings suggest that there is little evidence that changes in income levels for households receiving remittances are spent very differently from the households not receiving them. Finally, findings may indicate that the policy relevance for remittances is not as important as suggested by the literature for developing countries, especially for those with a similar profile to Bangladesh.

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