Do Government Programs "Crowd In" Remittances?

Does household income and public transfer income affect remittances?
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Many immigrant households receive means-tested and non-means-tested government transfers. Immigrant households send substantial amounts of remittances abroad, especially to Mexico. This study represents:

  • The research to explore the link between government transfers and remittances by the immigrant households in the United States;
  • The estimated impacts of both means-tested and non-means-tested government transfers on remittances from a sample of households in two border communities in California and Texas;
  • A linear specification to estimate the impact of government transfers, earnings, and other household variables on remittances.

The paper's econometric analysis uncovers the following key findings:

  • The receipt of means-tested public transfers does not stimulate remittances, and remittances are inelastic with respect to total household income;
  • Remittance expenditures are inelastic with respect to earnings, which do not include transfers;
  • Private transfers do not respond in the same way to all sources of income;
  • Probability and levels of remittances differ depending on the type of government benefit.

The author observes that the facts do not support the argument that migrant remittances transfer the benefits of welfare and other means-tested income programs abroad. Some of the major conclusions that the study draws are:

  • On an average, immigrant families share their entitlements, including social security income, with households in Mexico;
  • Public assistance in the US may substitute for social and family support networks in Mexico;
  • US immigrant households receiving social security and other non-means tested entitlements are in a better financial position to send remittances;
  • More than 50 percent of US immigrant households receiving non-means tested transfers also receive some sort of means-tested transfer.

About this Publication

By Taylor, J., Donato, K. , Kanaiaupuni, S.