Remittances and inequality reconsidered: Direct, indirect, and intertemporal effects

Abstract

Forthcoming in Journal of Policy Modelling Remittances and Inequality Reconsidered: Direct, Indirect, and Intertemporal Effects The impact of migrant remittances on the size distribution of income in LDC rural areas has received growing attention in the economics literature because of the importance of migration income in rural household budgets, the contribution of rural income inequalities to overall income inequality, concerns for rural poverty, and investment and consumption linkages. Gini decompositions (Stark, Taylor, and Yitzhaki, 1986 and 1988; Adams, 1991) and comparisons of Gini coefficients with and without migrant remittances (Oberai and Singh, 1980; Knowles and Anker, 1981) produce conflicting findings with regard to the direct short-run impact of remittances on income inequality in different LDC rural settings. There are theoretical reasons to suspect that the direct impacts of migrant remittances do not capture the full short-run impact of remittances on income inequality. Income from labor migrants may contribute to household-farms' total income not only directly but also indirectly, by influencing income from other sources (i.e., crop income). In the long run, remittances may finance the accumulation of income-producing assets on household farms. By influencing the distribution of these assets, remittances may help reshape the distribution of total household-farm income over time. Non-unitary short-run impacts of migrant remittances on household-farm full incomes are ruled out by the neoclassical household-farm model (e.g ., see Singh, Squire, and Strauss, 1986), which disregards risk and assumes that rural markets (including credit markets) are complete and well-functioning. l Under these assumptions, the household-farm model is recursive: production decisions are independent of the household-farm budget constraint and of other sources of 1 Bardhan (1988) offers a critique of these assumptions of neoclassical household-farm models.

Remittances, schooling, and child labor in Mexico

“…Indeed, migration involves different effects on household decisions that may go in opposite directions. In particular, remittance receipts from family members working abroad could lead to higher school retention and lower child labor, especially if they relax liquidity constraints (Taylor, 1992;Taylor and Wyatt, 1996). This effect, however, may be offset by low perceived returns to education, given the job that children are expected to find in the U.S. if they are to migrate themselves in the future, or by the fact that migration may disrupt family life and, thus, have negative effects on school attendance (Kandel and Kao, 2001;McKenzie and Rapoport, 2010;McKenzie and Sasin, 2007).…”

Low-Skilled Labor Migration in Tajikistan: Determinants and Effects on Expenditure Patterns

“…Most existing work (see, for example, Taylor, 1992) base the (assumed positive) long-term effects mainly on productive asset accumulation. In this paper, an alternative hypothesis is introduced.…”

Repeat Migration and Remittances as Mechanisms for Wealth Inequality in 119 Communities From the Mexican Migration Project Data

“…Studies have linked this trend to international remittances, but yielded conflicting findings. In rural Mexico, for example, Taylor (1992) and Taylor, Adams and Mora (2009) found an equalizing effect of remittances on the income distribution, whereas Mora (2005) and Acosta et al (2008) observed the opposite pattern.…”