Naufal, Georges Sami (2007-12). Remittances: determinants, motivations and effects. Doctoral Dissertation. Thesis uri icon

abstract

  • This dissertation examines the determinants, motivations and effects of remittances. In that last two decades remittances have gained interest due to their large size. For several developing countries remittances constitute a large portion of their gross domestic product and sometimes exceed foreign direct investment. In the first essay, I use a unique data set from Nicaragua to asses the behavior of persons who send money back home. I estimate a heteroskedastic Tobit with a known form of variance to estimate the correlation of the remitting decisions of migrants. Working, residing in a developed country and belonging to the nuclear family positively affect remittances. The labor status and the level of education of the head of the household both affect remittances. The decision to participate in the remitting process appears to be positively related across migrants within the same receiving household. The second essay presents a simple theoretical model of migrants' remitting behavior. I consider two general motivations for remitting: altruism and self-interest. From the same data set used in the first chapter, I estimate a heteroskedastic Tobit and a sample selection equation to empirically test the findings of the theoretical model. Evidence suggests that migrants from Nicaragua remit for altruistic reasons. Moreover some gender heterogeneity exists in the remitting behavior. In the last essay, I study the impact of remittances on a small open economy using a stochastic limited participation model with cash in advance constraints and costly adjustment of cash holdings. I examine the impact of remittances on the steady state of the economy and on the dynamic response of variables to money shocks, output shocks, and shocks to remittance flows. I also examine the impact on dynamic responses to shocks of alternative specifications regarding the initial impact of a monetary injection or a remittances shock on the economy. I find that a positive remittances shock forces the exchange rate to depreciate and lowers both output and consumption in the period of the shock, irrespective of adjustment costs on money balances. Also, the positive remittance shock lowers utility during the period of the shock but improves it thereafter.

publication date

  • December 2007