Remittances and Household Expenditures: Evidence from Ghana

Nico Giammarino & Stefano Ragone

Student thesis: Master thesis

Abstract

This paper utilizes data from the 2009-10 Socioeconomic Panel Survey to explore whether remittances lead to different spending patterns across three population groups in Ghana: internal recipients, international recipients and non-recipients. We construct an econometric model that includes, among the others, control variables for the receipt of either internal or international remittances and a set of household characteristics. Through this model, we estimate the budget share for five good categories: food, non-food, health, education, and dwelling. The study finds that Ghanaian households receiving remittances from abroad exhibit a statistically different consumption pattern than those that do not receive such transfers in health, education and dwelling. In contrast, internal recipients show a statistically different expenditure pattern than that of non-recipients, only in the case of education expenditures.
We then focus on the marginal spending behaviour of our population groups. We essentially interrogate how Ghanaian households spend one more Cedi of their income. Overall, it appears clear that some major patterns can be identified. First, households who do not receive remittances at all have a higher marginal propensity to consume food goods. In contrast, remittance-receiving households display higher marginal propensity to consume investment type goods, with the only exception being the marginal budget share of health. Second, it can be noticed that households receiving internal remittances and those receiving international remittances exhibit a diverging marginal spending behaviour only in the case of the non-food budget share. In the light of these findings, the present paper provides evidence that there is considerable heterogeneity in the effects of remittances on household spending behaviours.
Finally, we attempt to determine whether these diverse spending behaviours might be attributable to variations in the socio-economic characteristics of the household. Among the other factors, this study indicates that factors such as household composition, area of residence, education level of the household head are likely to influence the household expenditure patterns in Ghana.

EducationsMSc in International Business, (Graduate Programme) Final Thesis
LanguageEnglish
Publication date2017
Number of pages123
SupervisorsAri Kokko