Impact of foreign remittances on the household spending behaviour in Bangladesh

ABSTRACT

This paper analyses the impact of international remittances on household spending behaviour in the Bangladesh context. The total household spending has been classified into seven categories, namely education, health, food, consumed and durable goods, housing and land, investment and ‘other consumption’. For addressing the self-selection bias, we applied the propensity score matching technique. Moreover, to analyse the impact of remittances on the marginal spending behaviour we applied the Working-Leser (WL) model. Findings from the study reveal that remittances have positive and significant impact on the amount spent on almost all the spending categories except education, and investment. In terms of budgetary shares of different spending categories, households receiving remittances spend a lower fraction of their total spending on food and investment. Although the impact of remittances is positive and significant for the budget shares of health, housing and land, it is found to be insignificant for education and consumed and durables goods.

KEYWORDS:

• International remittance
• household consumption spending behaviour
• working-Lesermodel

Notes

1. A detailed description of these spending categories is presented in table 1

2. A detailed description of the variables is presented in table 3

3. The budget share of a particular spending category is calculated as the household annual spending on that particular category divided by the total household annual expenditure.

4. Number of observation is 45,993 for food, 41,708 for health, 27,614 for education, 40,348 for housing and land, 45,871 for consumed and durables, 21,787 for investment and 35,350 for others.

5. The p value is obtained from the two sided t test of equal mean for the two groups. It is the level of significance at which the hypothesis of equal mean for different spending categories across remittance recipient and non-recipient households can be rejected.

Additional information

Funding

This study did not receive any funding or financial support from any source.

Notes on contributors

Selim Raihan

Selim Raihan is a Professor of Economics at the University of Dhaka, and Executive Director of the South Asian Network on Economic Modeling (SANEM). He holds a PhD in Economics from The University of Manchester, UK. His research interests include economic modelling, migration and labour market issues, poverty and inequality, and international trade.

Mahtab Uddin

Mahtab Uddin is a Lecturer of Economics at the University of Dhaka, and Research Economist at SANEM. He completed his Bachelors and Masters in Economics from the University of Dhaka.

Sakil Ahmmed

Sakil Ahmmed is a Research Associate at SANEM. He completed his Bachelors and Masters in Economics from the University of Dhaka.