Thesis

Domestic Remittance in China: Rural–Urban Migration’s Trail of Inequality

Authors:
To read the full-text of this research, you can request a copy directly from the author.

Abstract

This thesis examines the flows of rural-to-urban migration in China with a focus on the trail of remitted cash and its role in rural village income inequality. It is the first to decompose rural household income inequality by income factor component using all 5 waves of rural household data available from CHIP (and RUMiC) surveys. Repeated cross section data is used to examine trends of the rural income profile and income inequality. Rural household income inequality is decomposed by factor component through the Gini index, the constant of variation, and the half-squared coefficient of variation. This thesis prioritizes the lowest and most vulnerable strata of the rural household income distribution with attention to different income sources’ capacity to alleviate poverty, situated within the broader context of Chinese liberalization. Migrant worker remittance flows are framed as spatial links whose proliferation is a co-production of an increasingly liberalized and competitive setting both in rural villages and urban centers of China. Remittance share regressions, analogous to Engel Curve regressions, are run to examine the differential impact of remittances across the rural income gradient. The statistical dispersion of remitted income is used as a proxy to illuminate the links between migration and a shifting gradient of rural mobility. Remittance income is found to have significant mitigatory effects on rural income inequality. Households in the 10th-50th percentile of the income distribution are found to have a significant dependence on remittances.

No full-text available

Request Full-text Paper PDF

To read the full-text of this research,
you can request a copy directly from the author.

ResearchGate has not been able to resolve any citations for this publication.
Article
Full-text available
This paper analyzes the impact of international remittances on household investment and poverty using panel data (2000 and 2007) from the Indonesian Family Life Survey (IFLS). Using a three-stage conditional logit model with instrumental variables to control for selection and endogeneity, it finds that households receiving remittances in 2007 spend more at the margin on one key consumption good (food) and more at the margin on one important investment good (education) compared to what they would have spent on these goods without the receipt of remittances. Using a bivariate probit model with random effects to control for selection and simultaneity, the paper also finds that households receiving remittances are less likely to be poor compared to a situation in which they did not receive remittances. These findings are important because they show that households can use remittances to help build human capital and to reduce poverty in remittance-receiving countries.
Article
Full-text available
The paper attempts to study the migration trends and the factors driving it in India and also to understand and compare the marginal spending behavior of three groups of households in India - those not receiving remittances, receiving internal remittances and receiving international remittances - with an emphasis on its impact on investment in human capital defined as education and health. The analysis, based on a nation-wide sample survey, reveals that migration, besides playing a major role in poverty reduction, also has an important bearing on marginal spending behavior much in keeping with Engels Law and also that the amount set aside towards human capital formation is significant, which has wider policy implications.
Article
Full-text available
Remittances are playing an increasingly important role in the economies of developing countries. In this paper, we study the effects of these flows on Pakistan’s labour market. We employ the 2007–2008 Household Integrated Economic Survey and Probit as well as Propensity Score Matching techniques to examine the impact on labour participation, quantity of work and activities of working as well as non-active members of remittance-receiving households. We find that both foreign and domestic remittances tend to lower labour supply of the recipient households. This impact is higher among women and among the young. The impact is more pronounced in the rural areas. In addition, foreign remittances increase the likelihood of household members attending middle school. We also examine the quantity of labour supplied by the remittance-recipient households. Results show little difference in the number of months and days worked between the households receiving and not receiving remittances. Furthermore, we find that the likelihood of being self-employed and cultivating one’s own land is higher among remittance recipients. In sum, our analysis highlights a higher role of foreign remittances in the labour market as compared to internal remittances.
Article
Full-text available
A prior review published in this journal considered the consequences of international migration for national economic development. In this article we examine theories and research on the relationship between international migration and development at the community level. Once again we conclude that prior work has been unduly pessimistic about the prospects for development as a result of international migration, largely because it has failed to take into account the complex, often indirect ways that migration and remittances influence the economic status of households and the communities that contain them.
Article
Full-text available
Roger Rouse is assistant professor of anthropology at the University of Michigan, Ann Arbor. He is currently a visiting research fellow at the University of California, Davis, Center for Comparative Research, where he is completing a book on the topic of his 1989 Stanford dissertation, "Mexican Migration to the USA: Family Relations in the Development of a Transnational Migrant Circuit." The first version of this paper was written in early 1988 while I was a visiting research fellow at the Center for U.S.-Mexican Studies, University of California, San Diego. It draws on fieldwork carried out between 1982 and 1984 under a doctoral fellowship from the Inter-American Foundation. I am grateful to both organizations for their support. Many of the ideas contained in the paper were developed in a study group on postmodernism organized with colleagues from the center. My principal thanks—for comments, criticisms, and immensely pleasant company—go to the group's members: Josefina Alcazar, Alberto Aziz, Roger Bartra, Luin Goldring, Lidia Pico, Claudia Schatán, and Francisco Valdés. I have also benefited from Khachig Tölölyan's sensitive reading of the text. 1. See Lockwood and Leinberger 35. The assertion of a false point of origin is apparently used so that the manufacturers can participate in foreign delivery contracts. See Soja 217. 2. "Hoy, ocho años de mi partida, cuando me preguntan por mi nacionalidad o identidad étnica, no puedo responder con una palabra, pues mi 'identidad' ya posee repertorios múltiples: soy mexicano pero tambien soy chicano y latinoamericano. En la frontera me dicen 'chilango' o 'mexiquillo;' en la capital 'pocho' o 'norteno' y en España 'sudaca.' . . . Mi compañera Emilia es angloitaliana pero habla español con acento argentine; y juntos caminamos entre los escombros de la torre de Babel de nuestra posmodernidad americana." Gómez-Peña (my translation). 3. See, for example, Clifford 22; and Rosaldo, Culture and Truth 217. 4. Jameson 83. Like Jameson, I find it useful to follow Ernest Mandel in arguing for the emergence since the Second World War of a new phase in monopoly capitalism, but I prefer to label this phase "transnational" rather than "late" partly to avoid the implication of imminent transcendence and, more positively, to emphasize the crucial role played by the constant movement of capital, labor, and information across national borders. 5. See Davis, "Urban Renaissance"; and Lipsitz, esp. 161. 6. It is important to stress that I am concerned not with the various meanings of this particular term but instead with the image itself. The term serves merely as a convenient marker. 7. See Williams 65-66. 8. Williams 65-66. 9. The combination of these images is readily apparent in the classic works on rural social organization by Robert Redfield and Eric Wolf (The Little Community and Peasant Society and Culture and "Types of Latin American Peasantry"), both of whom draw heavily on Mexican materials, and can also be seen in Immanuel Wallerstein's tendency (in The Capitalist World Economy) to use nation-states as the constituent units of his world system, at least in the core. 10. This approach has been used in two related but different kinds of study. In work focusing on migration itself—especially on migration within Mexico—changes have commonly been gauged by comparing the forms of organization found in the points of destination with arrangements revealed by detailed research in the specific communities from which the migrants have come. See, for example, Butterworth; Kemper; and Lewis. In work on communities known to contain a significant number of migrants and descendants of migrants—and especially in work on Mexican and Chicano communities in the United States—it has been more common to compare forms of organization found in these communities with arrangements discovered...
Article
Full-text available
  International remittances flowing into developing countries are attracting increasing attention because of their rising volume and their impact on recipient countries. This paper uses a panel data set on poverty and international remittances for African countries to examine the impact of international remittances on poverty reduction in 33 African countries over the period 1990–2005. We find that international remittances—defined as the share of remittances in country GDP—reduce the level, depth, and severity of poverty in Africa. But the size of the poverty reduction depends on how poverty is being measured. After instrumenting for the possible endogeneity of international remittances, we find that a 10 percent increase in official international remittances as a share of GDP leads to a 2.9 percent decline in the poverty headcount or the share of people living in poverty. Also, the more sensitive poverty measures—the poverty gap (poverty depth) and squared poverty gap (poverty severity)—suggest that international remittances will have a similar impact on poverty reduction. The point estimates for the poverty gap and squared poverty gap suggest that a 10 percent increase in the share of international remittances will lead to a 2.9 percent and 2.8 percent decline, respectively, in the depth and severity of poverty in African countries. Regardless of the measure of poverty used as the dependent variable, income inequality (Gini index) has a positive and significant coefficient, indicating that greater inequality is associated with higher poverty in African countries, much in conformity with the literature. Similar results were obtained for trade openness. In the same vein, per capita income has a negative and significant effect on each measure of poverty used in the study. Our results also show that inflation rates positively and significantly affect poverty incidence, depth and severity in Africa. In all three poverty measures, the dummy variable for sub-Saharan Africa is strongly positive, and strongly negative for North Africa. The policy implications of these results are discussed.
Article
Full-text available
Despite the increasing importance of remittances in total international capital flows, the relationship between remittances and growth has not been adequately studied. This paper studies one of the links between remittances and growth, in particular how local financial sector development influences a country's capacity to take advantage of remittances. Using a newly-constructed dataset for remittances covering about 100 developing countries, we find that remittances boost growth in countries with less developed financial systems by providing an alternative way to finance investment and helping overcome liquidity constraints. This finding controls for the endogeneity of remittances and financial development, does not depend on the particular measure of financial sector development used, and is robust to a number of robustness tests, including threshold estimation. We also provide evidence that there could be an investment channel trough which remittances can promote growth especially when the financial sector does not meet the credit needs of the population.
Article
Prologue: In Medias Res TRAVELS Traveling Cultures A Ghost among Melanesians Spatial Practices: Fieldwork, Travel, and the Disciplining of Anthropology CONTACTS Four Northwest Coast Museums: Travel Reflections Paradise Museums as Contact Zones Palenque Log FUTURES Year of the Ram: Honolulu, February 2, 1991 Diasporas Immigrant Fort Ross Meditation Notes References Sources Acknowledgments Index
Chapter
To date, it has not been possible to address questions of income distribution in China systematically because of inadequate statistical data. There were few estimates of the distribution of income in China and the available estimates were fragmentary and unreliable. Our study begins to fill this void, providing relatively reliable and conceptually sound estimates of household income in both rural and urban areas.
Article
'After a quarter century of double-digit growth, 135 million rural migrants were living in China's cities by 2007. This massive migration exceeds anything else recorded in human history. Based on new survey data, The Great Migration explores cause and effect while comparing China's restrictive with Indonesia's liberal migration policies. The result is the best book on rural-urban migration thus far.' © Xin Meng, Chris Manning, Li Shi and Tadjuddin Noer Effendi 2010. All rights reserved.
Article
Purpose – The purpose of this paper is to empirically examine the role of institutions on the remittances–output growth volatility relationship. Design/methodology/approach – The data set of this paper is limited to 71 remittances recipient countries. In an attempt to deal with endogeneity issues, the paper adopts the use of system generalised method of moment (GMM). Findings – First, in consonance with earlier studies, the growth volatility reducing influence of remittances flows was established. Second, unlike the extant literature, the growth volatility reduction potential of remittances was found to be more pronounced in the presence of well-functioning institutions. Finally, the interaction of remittances with our six institutional quality measures showed that growth volatility reduced considerably with better institutions. Practical implications – In terms of policy, remittances recipient countries need to simultaneously pursue economic and governance reforms. Both of these will enhance the counter-cyclicality of remittances and possibly other capital flows. Originality/value – Substantial efforts have been devoted to investigating the impact of remittances on output growth volatility, while very little research attention has been devoted to analysing the impact of institutions on the remittances–output growth volatility nexus.
Article
This paper studies the impact of remittances on cross-country poverty using a panel data set from 65 developing counties over a long period 1970-2008. This study differs from the existing literature on poverty impact of remittances by explicitly noting the importance of financial development in shaping the link. This analysis shows that the effect of remittances on poverty depends on the level of financial development of a remittances receiving economy. Those economies that have a low level of financial development seem to acquire an unfavourable effect of remittances while economies with comparatively developed financial systems do not suffer from the adverse effects of remittances. In sum, remittances accentuate not ameliorate poverty in countries with the low level of financial development. Copyright (c) 2014 John Wiley & Sons, Ltd.
Article
There is a pervasive belief in the MIS research community that PLS has advantages over other techniques when analyzing small sample sizes or data with non-normal distributions. Based on these beliefs, major MIS journals have published studies using PLS with sample sizes that would be deemed unacceptably small if used with other statistical techniques. We used Monte Carlo simulation more extensively than previous research to evaluate PLS, multiple regression, and LISREL in terms of accuracy and statistical power under varying conditions of sample size, normality of the data, number of indicators per construct, reliability of the indicators, and complexity of the research model. We found that PLS performed as effectively as the other techniques in detecting actual paths, and not falsely detecting non-existent paths. However, because PLS (like regression) apparently does not compensate for measurement error, PLS and regression were consistently less accurate than LISREL. When used with small sample sizes, PLS, like the other techniques, suffers from increased standard deviations, decreased statistical power,and reduced accuracy. All three techniques were remarkably robust against moderate departures from normality, and equally so. In total, we found that the similarities in results across the three techniques were much stronger than the differences.
Article
This paper analyzes the impact of internal remittances (from Ghana) and international remittances (from African or other countries) on investment and poverty in Ghana. It has three findings. First, when compared to what they would have spent without the receipt of remittances, households receiving remittances spend less at the margin on food. Second, households receiving remittances spend more at the margin on three investment goods: education, housing, and health. Third, the receipt of remittances greatly reduces likelihood of household poverty. These findings support the growing view that remittances can reduce poverty and increase investment in developing countries.
Article
Information content may be used as a measure of the diversity of a many-species biological collection. The diversity of small collections, all of whose members can be identified and counted, is defined by Brillouin's measure of information. With larger collections it becomes necessary to estimate diversity; what is estimated is Shannon's measure of information which is a function of the population proportions of the several species. Different methods of estimation are appropriate for different types of collections. If the collection can be randomly sampled and the total number of species is known, Basharin's formula may be used. With a random sample from a population containing an unknown number of species, Good's method is sometimes applicable. With a patchy population of sessile organisms, such as a plant community, random samples are unobtainable since the contents of a randomly placed quadrat are not a random sample of the parent population. To estimate the diversity of such a community a method is proposed whereby the sample size is progressively increased by addition of new quadrats; as this is done the diversity of the pooled sample increases and then levels off. The mean increment in total diversity that results from enlarging the sample still more then provides an estimate of the diversity per individual in the whole population.
Article
This article offers econometric evidence that income remittances sent home by family migrants stimulate household‐farm incomes indirectly by relieving credit and risk constraints on household‐farm production. A high but unequally distributed shadow value of migrant remittances appears to reinforce an equalising direct effect of remittances on the income distribution across a sample of household‐farms in rural Mexico.
Article
The postulations presented concerning the role of urban to rural remittances in agricultural devleopment stem from a new theoretical approach to rural to urban migration. At the core of this approach lies the utility maximizing family in its specific agricultural context. The easing of the surplus and risk constraints becomes a crucial conditions for carrying out desired technical change. It is rural to urban migration of a family member (i.e. a son or daughter) that by bypassing the credit and insurance markets who are biased against small farmers facilitiates the change. This migration succeeds in accomplishing by means of its dual role in the accumulation of surplus (acting as an intermediate investment) and through diversification of income sources in the control over the level of risk. From the perspective of the question at hand the implication of the new theoretical approach is manifold. First it is clear that urban to rural remittances cannot capture the total effect that rural to urban migration bears on rural development. Secondly urban to rural remittances cannot be assumed to account for the total accumulation of surplus consequent upon migration. In principle a farm produced surplus and an urban produced surplus account in different situations with differing weights for the total accumulation of surplus consequent upon migration. Urban to rural remittances cannot account for the impact of rural to urban migration on agricultural development or for its total surplus accumulation effect yet it is important to attempt to quanitify these remittances. 2 serious problems are inherent in the usage and interpretation of existing evidence. The 1st problem stems from the intertemporal changes in the magnitude of the urban to rural remittances flow and the second arises from the prevalence of a counter flow. There is no reason why remittances (and migration at large) should not be manipulated to become a vehicle of rural propensity even if they were not conducive to agricultural development in the past. This may require some minimal institutional intervention. Sufficient evidence exists to suggest that rural to urban migration and urban to rural remittances can and have been used to transform agricultural modes of production. What a constructive approach should do is try to analyze why in other cases urban ro rural remittances have been less instrumental to agricultural development.
Article
This paper examines cultural and political dynamics that result when migrants from indigenous communities in Oaxaca, Mexico, migrate to the United States. Forced from their homeland because of economic conditions and prevented from complete settlement and incorporation in the United States due to their “illegal” status and economic and social barriers, the migrants create and live within a third sociocultural and political space popularly referred to as Oaxacalifornia, The cultural politics of this third space are shaped by tensions between the indigenous communities and various instances of the Mexican state that attempt to retain political hegemony over the indigenous communities within Mexico and abroad. Central to the transnational projects of the transnational indigenous organizations is the construction of pan‐Mixtec, pan‐Zapotec, and pan‐Oaxacan indigenous identities, which is a strategy with some contradictions, but one that appears to be effective for advancing the objectives of the organizations at this historic moment.
Book
"Billions of government dollars, and thousands of charitable organizations and NGOs, are dedicated to helping the world's poor. But much of the work they do is based on assumptions that are untested generalizations at best, flat out harmful misperceptions at worst. Banerjee and Duflo have pioneered the use of randomized control trials in development economics. Work based on these principles, supervised by the Poverty Action Lab at MIT, is being carried out in dozens of countries. Their work transforms certain presumptions: that microfinance is a cure-all, that schooling equals learning, that poverty at the level of 99 cents a day is just a more extreme version of the experience any of us have when our income falls uncomfortably low. Throughout, the authors emphasize that life for the poor is simply not like life for everyone else: it is a much more perilous adventure, denied many of the cushions and advantages that are routinely provided to the more affluent"--
Article
Methods involving rankings have been used by psychologists for half a century; and, although in their early development they were subjected to severe criticism, recent years have brought their rehabilitation and extension in new directions. Current interest in ranking methods has been displayed in several papers published in this Journal and very recently in the correspondence by Burt and Morris (1953). The present paper investigates theoretically the magnitude of the correlation between observations and the rank values by which they are sometimes replaced. It is found that in samples from the two most commonly considered types of statistical distribution, the normal and the uniform, this correlation is very high. With a sample as small as 25, it is .94 for the normal distribution and .96 for the uniform distribution; and these values increase, with sample size, towards limits of .98 and 1 respectively. In these circumstances there is justification for replacing the original observations by their ranks, since the consequent saving in computation entails very little loss of efficiency. The results of the investigation also turn out to have bearing on other matters of theoretical interest.
Article
Does access to capital lead to more robust investment in small scale enterprises in developing economies? We examine the effect of capital constraints on investment levels of microenterprises in Mexico. We use a survey of more than 6000 small firms located in 44 urban areas of Mexico. We focus on one important source of investment capital for Mexican entrepreneurs: earnings from migration by the owner or family members working in the United States. We estimate that remittances are responsible for almost 20% of the capital invested in microenterprises throughout urban Mexico, an additional cumulative investment capital among the firms represented by our sample of about $1.85 billion. Within the ten states with the highest rate of migration to the United States, we estimate that almost than a third of the capital invested in microenterprises is associated with remittances. In additional to showing the importance of remittances in microenterprise development, the findings suggest that access to capital is an important factor in enterprise development.
Article
A bank's interest expenses rise with its degree of internationalization, measured by its share of foreign liabilities in total liabilities or a Herfindahl index of international liability concentration, especially if the bank is performing badly. The results in this paper suggest that an international bank's cost of funds raised through a foreign subsidiary is 1.5-2.4 percent higher than the cost of funds for a purely domestic bank. That is a sizeable difference, given that the overall mean cost of funds is 3.3 percent. These results can be explained by limited incentives for national authorities to bail out an international bank, as well as an inefficient recovery and resolution process for international banks. In any event, a less reliable financial safety net appears to be a barrier to cross-border banking.
Article
Immigration affects sending countries through the receipt of remittance income. The impact of these cash transfers on households and communities has brought attention to remittances as a development mechanism. This study attempts to understand the degree to which household consumption is affected by the receipt of remittance income and the ways in which the broader communities may be impacted. Using household income and expenditure data for Mexico, expenditure patterns of remittance-receiving households are analyzed. Regression analysis indicates that remittance-receiving households spend a greater share of total income on durable goods, healthcare, and housing.
Article
The tremendous abundance of labour in rural areas is one of the most perplexing issues currently facing policy-makers in the People's Republic of China. Central and municipal authorities fear that large-scale labour movement out of rural China will have politically and socially destabilising effects on the cities and towns to which workers migrate. Recognising that there may be positive economic aspects associated with rural labour outflow, this research seeks to shed light on the transfer process with an emphasis on identifying the factors which motivate the observed frequent movement of migrants between their origin and destination points. Using household data collected in rural China, we investigate both out migration and return migration decisions. We demonstrate that observed migration patterns are the outcome of informed, rational responses to an environment filled with uncertainty and incomplete markets. To the extent that policymakers wish to minimise the more transient component of rural out-migration, attention must be paid to the underlying rural and urban institutions which give rise to the observed migration patterns.
Article
Within a theoretical framework, the author analyzes the effects that both workers' remittances and financial intermediation have on economic growth. It is found, among other things, that remittances can have significant positive long-run effects on growth. The author confronts the implications of the theoretical model proposed with panel data for countries in Latin America and the Caribbean. After considering the effect of long-run investment and demographic variables, and controlling for fixed time and country effects, the empirical analysis indicates that financial intermediation tends to increase the responsiveness of growth to remittances. The overall conclusion is that making financial services more generally available should lead to even better use of remittances, thus boosting growth in these countries.
Article
This paper presents evidence suggesting that international migrant remittances generally lead to improved developmental outcomes. Using a cross-section of Mexican municipalities in 2000, I show that increases in the fraction of households receiving international remittances are generally correlated with better schooling and health outcomes and with reductions in some dimensions of poverty. My results take into account the likely endogeneity among migration, remittances, and developmental outcome variables, and they suggest that measures to facilitate remittance flows are desirable.
Article
This article provides theoretical reasoning and empirical evidence that international migration decisions are influenced by relative as well as absolute income considerations. Potential gains in absolute income through migration are likely to play an important role in households’ migration decisions, but international migration by household members who hold promise for success as labor migrants can also be an effective strategy to improve a household’s income position relative to others in the household’s reference group. The findings reported in this article provide empirical support for the hypothesis that relative deprivation plays a significant role in Mexico-to-U. S. migration decisions. The findings also suggest that this migration is an effective mechanism for achieving income gains in households that send migrants to the U.S. and that households wisely choose as migrants those of their members who are most likely to provide net income gains.
Article
Evidence is presented elsewhere26 that intra-rural inequality is a major cause of rural-urban migration: that better-off villagers tend to be ‘pulled’, and worse-off villagers ‘pushed’, from the same subset of relatively ‘unequal’ villages. This paper argues that townward emigration, and its after-effects (remittances, return migration), in turn increases interpersonal and inter-household inequality within and between villages. As for rural labour productivity, the neoclassical expectation (that townward migration increases it) rests on special definitions and doubtful assumptions. Fortunately, in most of the poorer developing countries, rural-urban migration is much smaller, less permanent and more likely to set up countervailing economic-demographic pressures restoring the rural population share, than received opinion about ‘the urban crisis’ suggests. Migration does not equilibriate between urban and rural sectors, largely because of externalities and compositional factors; but it does smoothe itself, largely because individuals behave rationally and learn quickly. As so often, the lesson for development studies is not that ‘markets fail’. It is that, under conditions of both poverty and structural inequality, they function — but with generally unacceptable, misery-preserving consequences.
Article
Recent evidence indicates that rapid economic growth in rural China has been accompanied by increased inequality both within and across regions. Much of the increase in intraregional inequality has been attributed to growth of the rural nonagricultural sector. This paper investigates the effect of nonagricultural income on inequality using survey data from a county in central Guangdong Province. For the surveyed households the distribution of nonagricultural income is indeed less egalitarian than that of agricultural income. However, wage income is more equally distributed than income from nonagricultural self-employment. Estimation of men's and women's probabilities of employment indicates that households whose members are self-employed differ systematically from households whose members are wage-earners. The empirical results provide strong evidence that rural development policy which promotes wagetype employment will affect households differently than a policy which emphasizes household-based production.
Article
Rapid industrial growth in China coupled with economic reforms in the rural areas has created a growing demand for rural women's labor, though often at substantially lower wages than those earned by men employed in the same sector. An analysis of data collected in rural Guangdong province suggests that households may contribute to the observed male–female market wage differential through their influence in the formation of individuals' reservation wages. Under these circumstances, external employment opportunities, while no doubt serving to increase the household's overall level of income, may, on their own, be a less effective mechanism for raising the economic status of women. On the contrary, market wage signals may serve to reinforce, rather than to ameliorate, sex-based differences that arise within the household.
Article
This paper argues that the conventional approach of data averaging is problematic for exploring the growth–inequality nexus. It introduces the polynomial inverse lag (PIL) framework so that the impacts of inequality on investment, education, and ultimately on growth can be measured at precisely defined time lags. Combining PIL with simultaneous systems of equations, we analyze the growth–inequality relationship in postreform China, finding that this relationship is nonlinear and is negative irrespective of time horizons. Journal of Comparative Economics34 (4) (2006) 654–667.
Article
At any positive rate of growth, the higher the initial inequality, the lower the rate at which income-poverty falls. It is possible for inequality to be sufficiently high to result in rising poverty, despite good underlying growth prospects at low inequality.
Article
Few studies have examined the impact of international migration and remittances on poverty in the developing world. This paper fills this lacuna by constructing and analyzing a new data set on international migration, remittances, inequality, and poverty from 71 developing countries. The results show that both international migration and remittances significantly reduce the level, depth, and severity of poverty in the developing world. After instrumenting for the possible endogeneity of international migration, and controlling for various factors, results suggest that, on average, a 10% increase in the share of international migrants in a country’s population will lead to a 2.1% decline in the share of people living on less than $1.00 per person per day. After instrumenting for the possible endogeneity of international remittances, a similar 10% increase in per capita official international remittances will lead to a 3.5% decline in the share of people living in poverty.
Article
Workers' remittances to developing countries have become the second largest type of flows after foreign direct investment. This paper uses data on remittance flows to 109 developing countries during 1975–2007 to study the link between remittances and financial sector development. In particular, we examine the association between remittances and the aggregate level of deposits and credit intermediated by the local banking sector. This is an important question considering the extensive literature that has documented the growth-enhancing and poverty-reducing effects of financial development. We provide evidence of a positive, significant, and robust link between remittances and financial development in developing countries.
Article
Incl. bibl., abstract There is considerable debate regarding the relative contribution of international migrants' remittances to sustainable economic development. While officially recorded remittances to developing countries have increased over the last decade, research has not come to a consensus over whether remittances have a positive or negative impact on long-run growth. This paper argues that contradictory findings have emerged when looking at the remittances-growth link because of an omitted variable bias: specifically, remittances will be more likely to contribute to longer-term growth in countries with higher quality political and economic policies and institutions.
Article
In this article, a framework is proposed and techniques are developed for clarifying the effects of remittances on the accumulation of physical assets in one rural area. The study is based on a new, 5-year panel data set from rural Pakistan. Since this longitudinal data set contains detailed data on investment by type of rural asset, it provides a unique opportunity for analyzing how two types of remittances-internal and external-get invested in different physical assets over time. The analysis pursued in this article is quite focused. Most notably, the study concentrates on the direct, first-order effects of internal and external remittances on rural asset accumulation. While I am aware of the second- and third-order effects of remittances on wages and employment, because these effects are best measured in a general equilibrium model, they are largely ignored in this article. The article proceeds in five sections. Section I presents a general model for household utility, remittances, and investment. In Section II I discuss the data set. Section III presents an asset accumulation model, and in Section IV I discuss the results of this model. The conclusion is in Section V.
Article
Despite many approaches of neoclassical and endogenous growth theory, economists still face problems in explaining the reasons for income differences between countries. Institutional economics and the deep determinants of growth literature try to depart from pure economic facts to examine economic development. Therefore, this article analyzes the impact of institutions, geography, and integration on per capita income. Concerning theoretical reasoning, emphasis is on the emergence of institutions and their effect on economic growth. However, institutions can appear in different shapes since political, legal, and economic restrictions are not the only constraints on human behaviour. Norms and values also limit possible actions. Therefore, a differentiation between formal and informal institutions is made. Informal institutions are defined as beliefs, attitudes, moral, conventions, and codes of conduct. Property rights are assumed to be the basic formal institutional feature for economic success. Despite their direct impact on growth through individual utility maximization, property rights also make a statement concerning the political and legal environment of a country. Regarding the regression analysis, different religious affiliations are used as instrumental variables for formal and informal institutions. The regression results affirm a crucial role of informal and formal institutions concerning economic development. However, a high proportion of Protestant citizens encourage informal institutions that support economic growth, while a high Muslim proportion of the population is negatively correlated with growth-supporting formal institutions. --
Article
The focus of this paper is on the rural poor of south Asia and their struggle to cope with the seasonal risk of unemployment and the ensuing income risks. In the absence of formal credit or insurance markets the rural poor typically resort to, among other options, the following informal strategies to cope with seasonal income risks: (i) seasonal rural-to-urban migration, and (ii) mutual (ex-post) transfers between families of friends and relatives. Access to credit through a microfinance institution could also provide a competing source of insurance. The question raised in this paper is how the access to credit may affect the more traditional/time honoured means of risk coping, such as seasonal migration. Given that credit, i.e., a creditfinanced activity, is potentially a substitute for seasonal migration, it is reasonable to argue that easy access to credit (or high return on credit) will lower the incidence of migration. However, there also exists a potential complementarity between the two activities (if implemented jointly) in terms of gains due to diversification of income risks. That is, given that income from migration is not typically subject to the same shocks as income generated by a credit-financed activity, a joint adoption of both activities creates opportunities for diversification of risk in the family incomes portfolio. If the diversification gains are large enough then the adoption of both activities jointly will be preferred to adopting either of the activities individually. In that event, introduction of microfinance in rural societies may result in raising the incidence of migration. The joint adoption case for rural households is modelled using a choice theoretic framework, and exact conditions are derived for when joint adoption is preferable to adoption of a single project. The model of joint adoption is estimated by applying a Bivariate Probit regression model on a single cross-section of household survey data from rural Bangladesh. Our prel