<abstract xmlns="http://www.w3.org/1999/xhtml">

<p>The impact of remittances on households left behind by migration is ambiguous a priori due to competing income and substitution effects. We offer new evidence on the effect of remittances on household investment decisions. We enrich our analysis using microdata from five sub-Saharan African countries, different investment alternatives, and different remittance sources. We use a recursive bivariate probit model and imperfect instrumental variable approaches to account for endogeneity concerns. We find that remittances increase the likelihood of human, physical, and social capital investment in most of our sample countries. We also find that remittance sources have a notable influence on household investment decisions. Finally, we explore three potential mechanisms: income effect, substitution effect, and migration expectations. We find that the income effect of remittances mainly drives the positive effect on capital investment. However, we also find evidence of substitution effect by left-behind household members and migration expectations in some countries. We contribute to the ongoing debate on the effect of remittances on capital investments, and our results shed light on the heterogeneous effect of remittance in the literature.</p>
</abstract>

The impact of remittances on households left behind by migration is ambiguous a priori due to competing income and substitution effects. We offer new evidence on the effect of remittances on household investment decisions. We enrich our analysis using microdata from five sub-Saharan African countries, different investment alternatives, and different remittance sources. We use a recursive bivariate probit model and imperfect instrumental variable approaches to account for endogeneity concerns. We find that remittances increase the likelihood of human, physical, and social capital investment in most of our sample countries. We also find that remittance sources have a notable influence on household investment decisions. Finally, we explore three potential mechanisms: income effect, substitution effect, and migration expectations. We find that the income effect of remittances mainly drives the positive effect on capital investment. However, we also find evidence of substitution effect by left-behind household members and migration expectations in some countries. We contribute to the ongoing debate on the effect of remittances on capital investments, and our results shed light on the heterogeneous effect of remittance in the literature.

Remittances and Household Investment Decisions: Evidence from sub-Saharan Africa

IZA Journal of Development and Migration

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

{"article-title":"Remittances and Household Investment Decisions: Evidence from sub-Saharan Africa"}

The impact of remittances on households left behind by migration is ambiguous a priori due to competing income and substitution effects. We offer new evidence...

Remittances and Household Investment Decisions: Evidence from sub-Saharan Africa

Published Online: Apr 19, 2022

Page range: -

Accepted: Mar 11, 2022

DOI: https://doi.org/10.2478/izajodm-2022-0004

Keywords
remittances, investments, sub-Saharan Africa, physical capital, human capital, social capital

© 2022 Md Shahadath Hossain et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Remittances and Household Investment Decisions: Evidence from sub-Saharan Africa

Published Online: Apr 19, 2022

Page range: -

Accepted: Mar 11, 2022

DOI: https://doi.org/10.2478/izajodm-2022-0004

Keywordsremittances, investments, sub-Saharan Africa, physical capital, human capital, social capital

© 2022 Md Shahadath Hossain et al., published by Sciendo

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International License.

Keywords
remittances, investments, sub-Saharan Africa, physical capital, human capital, social capital