Why do migrants remit?

Abstract

This paper examines primary incentives of remitting. Using estimated bilateral data on remittances, this paper demonstrates that a rise in the home (remittance‐receiving) country's gross national income (GNI) per capita leads to fewer remittances and that a rise in the host (remittance‐sending) country's GNI per capita motivates migrants to remit more. Real exchange rates and real interest rates have no effect on remittances. These results indicate that altruism is an important and critical component of motivations behind remittances. However, altruism alone does not appear to be a sufficient explanation of the motivations behind remittances. Other incentives such as loan repayment and investment play a non‐negligible role in this regard as well. The degree of altruism is higher for migrants from developing countries in comparison with migrants from developed countries, and it is higher when we define remittances as “personal transfers” rather than “personal transfers and compensation of employees.” The results of the vector error correction model show if remittances deviate from the equilibrium relationship, they will eventually revert.

The asymmetric impact of oil prices on remittances: evidence from India

“…Exchange rate depreciation appears to have a negative impact on remittance inflows, suggesting substitution effect in remittance sending behaviour and is in agreement with the findings of Yang, () and Ojede et al, (). The results further show that GDP per capita is negatively associated with remittances in the short run, providing confirmatory evidence that altruism theory holds, suggesting counter‐cyclicality of remittances to India, and corroborating the findings of Azizi (), Vacaflores (), and Azizi ().…”

“…On the other hand, Yang (), Guetat and Sridi (), and Ojede et al, () demonstrate that exchange rate is negatively related to remittance inflows. Finally, findings of Gupta (), Cooray and Mallick (), and Azizi () reveal that remittances are insensitive to changes in exchange rate.…”

“…Focusing on the case of 15 MENA countries, Guetat and Sridi () conclude that GDP growth rate in the country of origin is conducive to remittance inflows, providing evidence in favour of self‐interest theory. Studying a sample of 192 developing (141) and developed (51) countries over the 1990–2015 period, Azizi () reports that remittances respond negatively to an increase GNI per capita, suggesting altruism in remittance behaviour.…”

Determinants of remittances in Egypt: Do macroeconomic instability and oil price matter?

“…This result suggests that neither altruism nor investment theory is the motivating factor for remittances. This finding is also consistent with Lim and Morshed (), but contradicts with the results of Mallick (), Azizi (), and Vacaflores ().…”

“… As argued by Azizi (), excluding the economic settings of host countries in the remittance determination equation may lead to omitted variable bias. Therefore, we incorporated economic settings of host countries into the remittance determination model. …”