The effects of international remittances on expenditure patterns of the left-behind households in Sub-Saharan Africa

Abstract

This article explores the effects of international remittances on the expenditure patterns of households in Sub-Saharan Africa (SSA). This article focuses on five countries in SSA, which are some of the destinations that account for the highest receipt of international remittances. We analyze both aggregate and distributional effects of international remittances on expenditure patterns of households. To investigate the distributional effect of international remittances, we adopt the instrumental variable quantile (IV-quantile) regression framework that allows us to simultaneously address the endogeneity of international remittances and possible heterogeneity in the impact of international remittances on households’ expenditure patterns. We instrument for international remittances by using the economic conditions in migrants’ countries as an instrument for international remittances. Our results show that the receipt of international remittances increases expenditures on food, durables, education, and health. Using the IV-quantile regression, we find the effects of international remittances on household expenditure on food, durables, education, and health increase across the different expenditure quantiles.