Remittances and household spending strategies: evidence from the Life in Kyrgyzstan Study, 2011–2013

ABSTRACT

Globalised labour migration and remittances can help alleviate household poverty and provide supplemental income in many countries. Kyrgyzstan, like other Central Asian countries, has experienced dramatic geopolitical changes, economic reform, and rapid demographic shifts in the post-Soviet-Union era. Based on measurements of GDP, it is one of the most remittance-dependent countries in the world. This study uses data from the Life in Kyrgyzstan Study collected from 2011 to 2013 to break down household budgets into eight consumption categories as part of a detailed analysis of how varying remittance receipt is related to household spending. We address two methodological concerns: (1) the endogeneity of remittances and (2) population heterogeneity. In so doing, we find remittances have limited effects on household spending – while changes in remittances do yield small changes on the budget shares of food and medical expenses, no effects were found on other consumption shares. These results suggest that households in Kyrgyzstan may take remittances as permanent income and proportionally alter consumption shares along with changes in remittances. By focusing on a country whose GDP relies heavily on remittances, the findings increase our understanding of how remittances affect spending at the household level.

KEYWORDS:

• Remittance
• labour migration
• livelihood
• household expenditure
• Kyrgyz Republic

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

1 In calculating household per capita income and remittances, only members who are long-term residents are considered. In another words, migrants are excluded from the denominator.

2 When the independent variable, remittances, changes from 1 to 1.01 (i.e. a 1% change), Equation (1) can be rewritten as $\theta \ln \left(remit\times \left(1+1\text{\%}\right)\right)-\theta \ln \left(remit\right)=\theta \ln \left({\displaystyle \frac{1+1\text{\%}}{1}}\right)\approx {\displaystyle \frac{\theta }{100}}$.

Additional information

Funding

This research was supported in part by the National Aeronautics and Space Administration Eunice Kennedy Shriver National Institute of Child Health and Human Development [Award # P2C HD041025], and the Social Science Research Institute and the Institute for Energy and the Environment at the Pennsylvania State University.