Scandinavian Working Papers in Economics

Memorandum,
Oslo University, Department of Economics

No 14/2012: The Link between International Remittances and Private Interhousehold Transfers

Berhe Mekonnen Beyene
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Berhe Mekonnen Beyene: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway

Abstract: The paper studies the link between international remittances and interhousehold transfers. Using a simple insurance model, it is shown that households transfer a large fraction of the remittance they receive from relatives abroad to other households. The effect of remittances on interhousehold transfers is empirically investigated using an urban household survey from Ethiopia. Consistent with the prediction of the model, remittance has a strong positive effect on the amount of transfer given, controlling for total household income and other covariates.

Keywords: international remittances; interhousehold transfers; mutual insurance; Ethiopia

JEL-codes: D19; F24; I30; R20

30 pages, March 15, 2012

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