Where do remittances go in household consumption? Empirical evidence from Sri Lanka‐wide micro‐data

Ramanie Samaratunge, Ajantha Sisira Kumara, Lakmal Abeysekera

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Abstract

Private internal and international remittances are a major source of household money in Sri Lanka, yet their impact on household welfare has long been a research gap. Based on the Migration and Development Theory, this article examines how private remittances affect household expenditure behaviour, using nationally representative microdata and applying quasi-experimental methods. Private remittances have significantly increased household per-capita expenditure and initiated positive behavioural changes via increased allocations for basic needs, human and physical capital investment. Compared with internal remittances, the impact of international remittance shows a strong potential for reducing poverty incidence and improving people's well-being: households in richer/richest expenditure quartiles and urban households invest in education, which supports the country's long-standing record of education. Rural households demonstrate favourable changes in spending behaviour with receiving private remittances. From a public policy standpoint, government favours migration so that remittances are more likely to flow. A proper remittance-transfer mechanism to encourage smooth remittance is thus required.

Original languageEnglish
Number of pages26
JournalInternational Migration
DOIs
Publication statusAccepted/In press - 2020

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