Chapter 20: The Importance of Accounting for Variability in Remittance Income
Catalina Amuedo-Dorantes and Susan Pozo1 A great deal of research has examined remittances to developing economies detailing the size and influence of these money flows. Are the poorest or the better-off households the primary recipients and are the flows sufficient to lift households out of poverty (for example, Lucas, 2007; Terry and Wilson, 2005)? Is labor force participation influenced and changed on account of remittance transfers (for example, Amuedo-Dorantes and Pozo, 2006; Cox-Edwards and Rodríguez-Oreggia, 2009; Funkhouser, 1992)? Is investment in schooling increased or decreased with the receipt of remittances (for example, Amuedo-Dorantes and Pozo, 2010; Borraz, 2005; Cox Edwards and Ureta, 2003; Kandel and Kao, 2001)? While much of this work is valuable and has the potential to increase our understanding of remittance flows and their implications, we are interested in yet another aspect of these flows that has not been researched to any great degree, as is the case with the ‘regularity’ and ‘predictability’ of remittance flows and how they can influence the economic behavior of recipient households. Before embarking on an extensive study of this nature, one might question the need to study how remittances behave and influence economic behavior. Aren’t remittances simply a transfer payment similar in nature to unemployment insurance payments, to welfare payments, and to old age security transfers? Why not simply resort to the vast literature on transfer payments to answer questions about the likely impact of remittances on household behavior? Our view is that remittances are significantly different from government transfer...
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