Date of Award

6-30-2016

Document Type

Open Access Dissertation

Department

Moore School of Business

Sub-Department

Economics

First Advisor

Douglas Woodward

Abstract

Existing literature on international remittances recognizes the increasing importance of these transfers on economic development as well as their effect on the reduction of poverty in developing countries. However, the studies on this topic are still divided over the long-term effects of remittances, identifying instances when remittances have either positive or negative results. Probably the most important oversight of the literature on international remittances and migration is the lack of the regional dimension in the analysis, which is the focus of this dissertation.

In the first chapter I propose a novel spatial dataset of remittances and spending from a nationally representative survey that I carried out in the Republic of Moldova in the first half of 2013. Based on these data, I build an empirical model that estimates average budget shares at the household level using the two-stage linear regression approach. The impact of remittances is evaluated by comparing marginal spending for households receiving remittances with their counterfactuals. In this essay, I perform the analysis at the national level and control effectively for the selection bias using a two-stage multinomial logit regression approach. The results at the national level are mixed and mostly appear to have negative implications on economic development of the country.

The second chapter continues the analysis in the first essay. In this chapter, I analyze remittance flows with a model that estimates regional (urban and rural) budget shares of consumption and investment expenditure categories for rural and urban households. This model is an innovation in the literature on remittances because it provides a technique for estimating regional spending and evaluating the impact of

remittances based on the location of spending, rather than the location of the household. The fundamental finding of the essay is that remittances influence the flight of productive capital out of rural areas into urban regions (a pattern similar to the crowding-out effect of the “Dutch Disease”). Thus, although rural regions have the highest frequency of households receiving international remittances, these transfers change the regional spending propensities of rural households, leading them to spend more on investment categories located in urban centers.

The third chapter builds upon the results of the second essay. This study offers a new approach of analyzing the effect of international migration (and remittances, implicitly) on regional economic development by investigating their impact on the dynamics of local human capital concentration. It is a departure from the classic analysis of the effect of remittances/migration on educational attainment (school enrollment) or the links between international migration and brain drain. Instead, it uses probit and conditional logit estimation techniques to evaluate the effect of money flowing from international migration on the likelihood that left-behind household members with tertiary education migrate domestically, attracted by employment opportunities in urban areas. The regional choice model is grounded in random utility maximization theory, which also adds more clarity about the urban job choice alternatives in Moldova. The main findings of the paper support the hypothesis that international migration/remittances lead to an increase in the preference for urban jobs of the “left-behind” tertiary-educated household members, especially for individuals with rural origins located outside the “primate city” region.

Rights

© 2016, Marian Manic

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