Determining factors and consequences of migrant worker remittances

While some papers investigate the consequences of the

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education levels, and development among others. While some papers investigate the consequences of the remittances flows from the host countries. 2.2 Microeconomic literature There has been extensive debate about the motivation of migrant workers with respect to sending remittances back home. Migrant workers may remit for a variety of reasons. Specifically, the study will focus on motives that are based on altruism, self-interest, insurance, and the level of loan repayments. These will be reviewed in turn below 2.2.1 Altruism Stark and Lucas (1985) studied on the motivations to remit evidence from Botswana. The study triggered the theoretical argument about the causal factors of remittances with which is still the basis of the current discussion and extensions. Stark and Lucas (1985) studied remittances on a family level and hypothesized the main causal factors to be "pure altruism", "pure self-interest” and “tempered altruism.” Stark and Lucas (1985), point out that migrant workers enjoy remitting to home country since they care about household consumption, however pure altruism is not sufficient to explain the dynamics of remittances. Their study suggest that the migrant workers send remittances not only for supporting the home household or pure altruism but the self-interest of the emigrant was also involved on these remittances and they have justified this into three major reasons. First, the emigrant expects to return home in the future and can benefit from the household gratitude from having sent remittances. Second, the emigrant remits because he/she is investing in assets in his/her home area and expects the household to take care of 19
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them. Third, an emigrant may remit because he/she is expecting to inherit from the household’s fortune. Stark and Lucas (1985) study therefore, concluded that the self-interest and pure altruism can influence the level of remittance flows. This indicates that the pure altruism and self-interest can influence on the level of the remittances flows from the host country. That is, if altruistic attachment decreases over time and altruism is the main motivation for remitting, then remittances should decrease over time. In terms of theoretical models, this implies that the utility obtained by the migrant worker for household consumption is decreasing over time. In the same way, it can be argued that remittances increase household income, as remittances can be invested in human capital or productive physical capital. In this case, the migrant worker remits less with time because the household needs less. The literature by Jafarey and Ilahi, (1999) tends to focus strongly on this aspect of microeconomic aspects with regard to workers’ remittances. Factors such as poor household, low wage rates, household size, age and gender of migrant worker can influence the size of the remittance flows. In fact, previous studies by (Backer 1981; Lucas and Stark, 1985and Russell 1986) demonstrate that there is a positive relationship between adverse conditions of the receiving household and remittances sent. Since the migrant worker cares about family
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  • Fall '15
  • Inflation, ........., Human migration, Gulf Cooperation Council

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