Essays on Migration, Remittance and Households Consumption, Production and Investment Decision: Evidence from Bangladesh

This dissertation consists of three related essays on the motivation of migration, remittance, and the effect of remittance on households. For the empirical analysis, we use Household Income Expenditure Survey (HIES-2010) data sets from Bangladesh, managed and developed by Bangladesh Bureau of Statistics (BBS). Chapter one gives an introduction to the essays.

In chapter two, we employ multinomial conditional logit estimation to study the risk diversification motive of migration using household level data from Bangladesh. The household as a whole takes migration decisions to maximize expected utility. Risk-averse household allocates its members to rural agricultural, urban formal or urban informal sectors to maximize the expected utility of the household. The rural agricultural and the urban informal sector incomes are assumed to be stochastic and potentially correlated. Families send members to the urban informal sector to reduce the volatility of aggregate income as in the portfolio choice model in finance. Empirical results support the predictions of the model. Rural households are more likely to send a member to an urban destination with a higher average monthly income and lower income volatility. Households are also more likely to send a member to a destination that has a low-income correlation with the location of origin. The multinomial conditional logit model also admits the use of both alternative specific and household specific variables that are of interest in migration analysis.

In chapter three, we examine the motivation for sending remittance by migrant members. International and internal remittances contribute a significant amount to the disposable income for many households in developing countries like Bangladesh. We discuss a simple theory of remittance where insurance is a particular case of the altruistic model. Our results show that the number of migrants and total household income per-capita are inversely related to the amount of remittance sent by a migrant, thus supporting the altruistic motive for remittances. We find that the Heckman selection estimation is asymptotically consistent for the sample and insurance model is nested in the altruistic model of remittance.

In chapter four, we use the Heckman selection, multinomial logit, and three-stage least square estimations to analyze the effects of internal and international remittances on the recipient households consumption structure, human capital investment, choice of school and crop production in Bangladesh. First, for both internal and international remittances have a positive and significant impact on all expenditure categories. Second, controlling both endogeneity and selection issues, results show that both domestic and international remittance increases households investments in human capital. Third, foreign remittance has a positive effect on children regarding their choice of private schools with and without government grant and other schools. Internal remittance has a positive effect on attendance in institutions other than public and private schools. Finally, domestic and international remittances increase households crop production. These findings support the growing view that remittances improve households living standards through a variety of channels.