Thesis
Determinants of remittances: a generalized ordered probit approach
Washington State University
Master of Arts (MA), Washington State University
2007
Handle:
https://hdl.handle.net/2376/101058
Abstract
Worldwide remittances have dramatically increased over the past few decades and as a result, many studies have been devoted to determining why one remits. Theoretical models attempting to explain why one remits are often based on altruistic or self-interested motivations. However, while modeling the motivations to remit these theoretical models fail to model net income as a predecessor to remitting. I present a theoretical model where the amount of remittances are determined by the migrant maximizing his/her utility function subject to a subsistence level constraint in addition to a typical budget constraint. From this theoretical format I postulate two testable hypotheses regarding the derivative of remittances with respect to a change in income. The first hypothesis stems from the subsistence level constraint, where the migrant's remittance level will likely remain equal to zero with an increase in earnings. The second hypothesis stems from those migrants who have surpassed a subsistence income level. In this case, the derivative of remittances with respect to a change in income will be positive. I analyze data from Mexican migrants in the United States to test these two hypotheses. I propose the use of a generalized ordered probit as the appropriate estimation approach for the given data, which approach to my knowledge has not been previously used in this literature. By the use of the generalized ordered probit, I alleviate the problem of distinguishing the different effects of the independent variables on the level of the amount remitted and the likelihood of remitting. Also, with this estimation approach, I am more apt to determine any idiosyncratic effects of the independent variables on the specific levels of remitting. My results support the proposed hypotheses and therefore I conclude that in fact a subsistence level constraint is present among migrants. Following from the theory and empirical analysis it is imperative in modeling the determinants to remit to incorporate the capacity to remit along with the specified motivations.
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Details
- Title
- Determinants of remittances
- Creators
- Adam Christopher McCoy
- Contributors
- Mudziviri Nziramasanga (Degree Supervisor)
- Awarding Institution
- Washington State University
- Academic Unit
- Economic Sciences, School of
- Theses and Dissertations
- Master of Arts (MA), Washington State University
- Publisher
- Washington State University; Pullman, Wash. :
- Identifiers
- 99900525127701842
- Language
- English
- Resource Type
- Thesis