Lykke E. Andersen, Bent Jesper Christensen, and Oscar Molina Tejerina
Publication Date:
12-2005
Content Type:
Working Paper
Institution:
Institute for Advanced Development Studies (INESAD)
Abstract:
Remittances are a very important source of income for many Nicaraguan
families. More than 40% of all households receive remittances that on average
amount to 12-15% of total household income in these households. More than
30% of these households receive remittances at least monthly, implying that it is
a relatively stable source of income.
This paper shows that remittances do tend to reduce the vulnerability of
households and increase their upward social mobility, at least as long as the
households do not depend too heavily on remittances.
However, remittances also cause moral hazard problems. Nicaraguans tend
to reduce their labor supply in response to more remittances, and they also tend
to reduce their savings rates, both of which are detrimental to long run
economic growth.
Topic:
Foreign Aid, Investment, Behavior, Remittances, and Social Mobility