Estimating the impact of international remittance on households expenditure in Bangladesh
2016
International remittance is an important source of foreign capital for the
developing and less developed countries. The remittance has become a
focal issue in economic literature for over two or more decades, because
of its rise in volume as well as its potentiality in reduction in poverty in
many of these countries. It is also observed that the flows of remittance
have continued to increase together with the rise in migrants’ number
around the world. Reasonably significant inflows of remittances into the
economies of the developing countries have macroeconomic effects,
which may have critical and important implications for many of these
countries. However, available studies show different types of results with
respect to the effects of remittances on economic growth. These studies
also differ in their methodologies. In the context of the Bangladesh
economy, remittance plays an important role in terms of its contribution
to the gross national income and foreign exchange earnings. Anecdotal
evidence suggests that remittance has helped alleviating poverty for
many of the households, both in the rural and urban areas. However,
there is very little systematic research with a view to exploring the link
between remittance and poverty in the context of the Bangladesh
economy.
Large inflows of remittances had macroeconomic and developmentalimplications for Bangladesh’s economy. Over the years, Bangladesh has
moved away from aid dependency. Remittance also plays a critical rolein providing the foreign currency and financing the trade deficit of
Bangladesh. Raihan et al. (2009) showed that there was a strong multiplier
effect of these remittances on the rural areas of Bangladesh, such as
through increased consumption spending and increased investment on
health and education relative to non-migrant families, and also through
the establishment of enterprises and small businesses by returnee migrants
or their family members, which are generating employment and creating
markets for locally produced goods and services. Using household data
and CGE model, Khondker and Raihan (2009) showed a large impact of
remittances on reduction in poverty in Bangladesh.
Against this backdrop, this study examines the impact of remittances onhouseholds’ expenditure, savings and investment behaviour in Bangladesh.
This chapter uses a cross-section econometric analysis exploring the links
between remittances and expenditure for the households using the latest
household survey data from RMMRU.
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