Journal of Finance and Economics

Journal of Finance and Economics

ISSN: 2291-4951 (Print)    ISSN: 2291-496X (Online)

Volume 4 (2016), No. 3, Pages 12-31

DOI: 10.12735/jfe.v4n3p12

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Remittances, Household Investment and Poverty in Indonesia

Alfredo Cuecuecha1  Richard H. Adams Jr.2 

1El Colegio de Tlaxcala, A.C., Mexico
2Developments Prospects Group (DECPG), World Bank

URL: http://dx.doi.org/10.12735/jfe.v4n3p12

To Cite this Article     Article Views: 365     Downloads: 244  Since deposited on 2016-09-18

Abstract

This paper analyzes the impact of international remittances on household investment and poverty using panel data (2000 and 2007) from the Indonesian Family Life Survey (IFLS). Using a three-stage conditional logit model with instrumental variables to control for selection and endogeneity, it finds that households receiving remittances in 2007 spend more at the margin on one key consumption good (food) and more at the margin on one important investment good (education) compared to what they would have spent on these goods without the receipt of remittances. Using a bivariate probit model with random effects to control for selection and simultaneity, the paper also finds that households receiving remittances are less likely to be poor compared to a situation in which they did not receive remittances. These findings are important because they show that households can use remittances to help build human capital and to reduce poverty in remittance-receiving countries.

JEL Classifications: F24, O12, O15, O53

Keywords: remittances, investment, poverty, Indonesia

To Cite this Article: Cuecuecha, A., & Adams Jr., R. H. (2016). Remittances, household investment and poverty in Indonesia. Journal of Finance and Economics, 4(3), 12-31. http://dx.doi.org/10.12735/jfe.v4n3p12

Copyright © A. Cuecuecha & R. H. Adams Jr.

Creative Commons License
This article is published under license to Science and Education Centre of North America. This is an Open Access article distributed under the terms of the Creative Commons Attribution 4.0 International License.

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Remittances, Household Investment and Poverty in Indonesia
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