Can Remittance Be an Effective Poverty Alleviation Strategy?

36 Pages·2016·0.14 MB·English

Can Remittance Be an Effective Poverty Alleviation
Strategy? Evidence from Myanmar
(cid:3)
Yalei ZHAI and Hisaki KONO
December 8, 2016
Preliminary: Not for citation
Abstract
The impact of remittance on poverty reduction would depend on whether the poor
receive more remittance along with the expansion of migration and remittance oppor-
tunities. We analyze remittance decisions of unmarried female migrants in Myanmar,
based on the original survey in the unique naturally well \controlled’ context. We
found that migrants from poorer households tend to remit less, indicating the limited
impact of remittance on poverty reduction. Further, our decomposition analysis shows
thatsubstantialpartofthedifferentbehaviorbetweenmigrantsfrompoorfamiliesand
better-off families is explained by the connection with origin family, especially through
marriagearrangement. Parentsofpoorhouseholdscouldnotarrangemarriagefortheir
daughters with better-off men, and this low prospect drove young female migrants to
spend more on marriage partner huntingactivities.instead of sending remittance. Con-
sidering remittance decision in conjunction with migrants’ consumption, savings and
investment decisions are thus important for better understanding of remittance behav-
ior.
(cid:3)Kyoto University, Yoshida-Honmachi, Sakyo-ku, Kyoto 606-8501, Japan. Zhai: [email protected];
Kono: [email protected]. We would like to thank Masayuki Kudamats and Takiya Takii for their
useful comments. We also bene(cid:12)ted from our insightful discussions and interactions with participants of the
workshop at Osaka University and Kyoto University. The usual disclaimers apply.
1
1 Introduction
There is an increasing interest in the empirical research on the (cid:13)ow of migrants’ remittances
as a means of poverty reduction (Yang, 2011). Migrants’ remittances constitute a signi(cid:12)cant
proportion of overall income for recipients and are considered essential for survival among
extremely poor households (Cox et al., 1998). At a cross-national level, Adams and Page
(2005) (cid:12)nd that a 10% increase in per capita remittances leads to a 3.5% decrease in the
share of people living in poverty in the recipient countries, while Outlook (2005) shows that
a 2.5% increase in the ratio of remittances to GDP is associated with a 0.5% decrease in
poverty. Studies based on the household level data have also shown that poverty indices
have been ameliorated through remittance in(cid:13)ows in Guatemala (Adams Jr, 2004), Mexico
(Adams et al., 2005), the Philippines (Yang and Martinez, 2005), and Ghana (Adams, 2006).
However, most studies that have explored the effects of remittances at household level
estimate only the impact of remittance on those who received the remittance. They basically
compare the poor families who received more remittance and who received less (or zero)
remittance. However, even if the remittance could increase consumption or welfare level of
the poor households, it would have limited impact on poverty reduction if the recipient of
the remittance was mostly the better-off households and only a small fraction of the poor
familiesreceivedremittance. Eventually, theeffectivenessofremittanceonpovertyreduction
crucially depends on the size of the remittance the poor households actually receive.
One could investigate if the poorer households actually received less remittance from
the household data. But without knowing the earnings level and consumption pattern of
the migrants, it would be difficult to tell if the poor households received less remittance just
becausetheirmigratingfamilymemberearnedlessincomeorratherbecausethemigrantshad
less motivations to send. If the former is the case, then expansion of earning opportunities
in the destination would increase the remittance amount and hence contribute to poverty
reduction, but if the latter is the case, it would not result in poverty reduction as remittance
amounts would not increase so much with their low motivation for remittance.
We utilize the original survey conducted in seven villages in Northern Myanmar to inves-
tigate the remittance decision of migrants, focusing on the difference between migrants from
poor households and better-off households. Our data set contain information on household
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characteristics such as asset levels as well as migrant characteristics including their income
levels. Further, even though the sample size is rather small and there are no exogenous
variation to identify any causal effects, the unique setting of the survey sites provide us with
a well \controlled" natural context. Local town development caused by casino industry has
generated increasing labor demands for young female in remote areas where there were no
other non-agricultural employment opportunities especially for women. As a result, almost
all the young female migrate into the town and work as casino dealers or waitress in restau-
rants surrounding the casino shops with almost the same wage levels. Hence there are no
selection issues on migration because all the young unmarried females migrated, and the
migrants are quite homogeneous in terms of their working conditions, their earnings, their
origin and of course their destination. They shared the same cultural background and same
remittancetechnology,andthesamerelationshipwiththeoriginfamily, unmarrieddaughters
and their parents, without no left-behind children. Hence the difference between migrants
can be solely attributed to the difference in the small number of characteristics, alleviating
the omitted variable biases. Further, due to the patrilineal culture, we can exclude some of
remittance motivation such as inheritance motives and investment motives.
We found female migrants from poor households tended to remit less, and family ties
played a substantial role in remittance decision. Our decomposition analysis, which is re-
garded as the extension of the omitted variable bias formula to the case of multiple omitted
variables, shows that the connection with origin family, especially through marriage ar-
rangement, explained the major portion of the difference in the remittance decision between
migrants from poor households and better-off households. Moreover, female migrants from
poor households tend to spend their incomes on consumption (particularly shopping, enter-
tainment and room-rent), rather than remittances and savings. This new (cid:12)ndings could be
attributed to "self-investment" of female migrants, which gave them advantages in the mar-
riage market. Considering remittance decision in conjunction with migrants’ consumption,
savings and investment decisions are thus important for better understanding of remittance
behavior.
The remainder of this paper is structured as follows. First we provide a short overview of
the existing literature on the motives of remittance in section 2. In section 3, we describe the
unique context of our survey site, and explain our household and migrant survey. Section
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4 presents the empirical results regarding to the remittance decision. Then we offer the
decompositionframeworkandprovidetheresultsinSection5. Insection6,weinvestigatethe
consumptionandsavingdecisionofmigrantstoexplorewhichconsumptionpurposemigrants
spent money instead of sending remittance, which provides us the underlying mechanisms
of the observed remittance decision. Section 7 offers the conclusion.
2 Motivation of remittance
Our aim is to evaluate the potential impact of remittance on poverty reduction by examining
if poorer households tend to receive more remittance, with taking migrant’s earnings level
into account, and, if any, explore the factors which made remittance decision of migrants
from poor households different from that of migrants from better-off households. For clear
understanding, it is bene(cid:12)cial to summarize the motives of sending remittance based on the
existing literature before explaining our research design.
There is a wide range of studies investigating the motivations to remit. One strand of
the research stresses the familial agreements on the remittance. Migration and remittance
are considered to be a part of household resource arrangement to maximize the household
utility, especially through investment (Ahlburg and Brown, 1998; Blue, 2004)) and insurance
(Cox et al., 1998; Gubert, 2002). Households send the migrants to (cid:12)nance investment by the
remittance, or to allocate the household member in the place where the income shocks are
not positively correlated to reduce the vulnerability to risks.
Another strand of research examines the individual motives for remittance, which can
be classi(cid:12)ed into (1) altruistic motive (Becker, 1974; Lucas and Stark, 1985; Funkhouser,
1995; Cox et al., 1998), (2) exchange motive (Bernheim et al., 1986; Cox, 1987; Cox et al.,
1998), (3) inheritance motive (Bernheim et al., 1986; Hoddinott, 1994; De la Briere et al.,
2002; Osili, 2007), and (4) loan repayment motive (Poirine, 1997; Ilahi and Jafarey, 1999).
With altruistic motive, migrants remit because they care about the family they have left
behind. Exchange motive refers to the remittance sent in exchange for "services" from their
families such as taking care of their assets, livestock, and other such concerns. Inheritance
motiveindicatestheremittancesenttomaintainorincreasetheirinheritanceportionthrough
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\good" behavior that takes the form of remittances.1 Loan repayment motive comes from
migrants’ wish to repay their \debt" such as their education costs and other forms of bene(cid:12)ts
received in the past.
In terms of the relationship between remittance size and household wealth, familial agree-
ments and altruistic motives predict that given the migrant income level, poorer households
receive larger remittances. For example, Funkhouser (1995) points out the altruistic mo-
tive predicts that low-income households receive more and remittances, increasing with the
degree of proximity between the migrant and the remaining household members as well as
the migrant’s intentions to return. On the contrary, exchange motive, inheritance motive,
and loan repayment motive holds the opposite view. De la Briere et al. (2002) predict that
the amount of the remittance increases with the household’s assets and income, and the
probability of inheritance.
3 Survey
3.1 Background
We selected villages belonging to Kokang in Myanmar, which is located adjacent to China,
as our survey sites.2 Following a broad investigation of 4,951 households in 61 villages in this
region, we selected seven villages for the detailed household and migrant survey, considering
similar topographic and cultural conditions. 3 We interviewed 256 households in these seven
villages in 2014 and 2015, and collected some additional information by a short survey in
2016.4
Previously the majority of households in this region relied their livelihoods on opium
poppy cultivation. After the strict enforcement of anti-drug campaign during 1996 to 2003,
sugarcane was introduced around the Laukkai Basin, whereas dry rice, maize, and walnuts
1Inheritance motives can be placed in the familial agreement as the family could use the rejection of
future inheritance as an enforcement device for their migrants to send the remittance.
2Kokang, a self-administered zone of Myanmar, is part of the so-called "Golden Triangle". In January
2011, the former First Special Region of the northern Shan State of Burma (Kokang) was placed under the
jurisdiction of the Myanmarese government and was renamed the Kokang Self-Administered Zone.
3Thesevensamplevillagesmeetthefollowingrequirements: mountainousarea, nosugarcanecultivation,
single ethnic, a one-day trip between Laukkai and the villages cannot be achieved.
4Our survey was interrupted by the armed con(cid:13)icts occurred in Kokang in the beginning of 2015, and
resumed in the end of 2015.
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became the main crops in the mountains, as alternatives to opium poppy.5 Because of the
remoteness to the market and poor infrastructure conditions, alternative crops have not
brought good income opportunities to the mountainous people, and these villages remain
poor. However, casinos have opened in urban areas (mostly the Laukkai Basin) since the
late 1990s. Indeed, there are 14 casinos in central Laukkai, which provide 10,000 to 12,000
job opportunities. The economic development caused by casino industry stimulate the de-
velopment of other industries, restaurants, karaoke bars, and other leisure facilities were also
established in central Laukkai.
Due to the lack of employment opportunities in inland Myanmar (urban area) and the re-
strictive regulations of the foreigners ’employment in China-Myanmar border areas, Laukkai
is the exclusive destination of female migrants in our survey sites, and most young female
migrate to Laukkai to work for casino industry. Among casino workers, over 90% are 12 to
25-year-old female workers who migrate from urban area. They typically work as dealers
and enjoy high favor in the Laukkai casino worker market because of casino customers’pref-
erences. The wage level of dealers in each casino is almost the same: nearly Yuan 1200 to
1500 per month. Migrants who work in the restaurants (some are run by the casino owners)
have almost the same working condition and the same salary range with migrants who work
in the casinos.6
The fact that the majority of young female labors migrate to Laukkai, and work for
casino industry, provides us with the well "controlled" natural context where all the migrat-
ing household members share the same origin and the same destination, work in the same
industry for similar wage, and hence share same cultural and social contexts and the same
remittance technology.7 Further, as most young female migrate to Laukkai, there are little
selection issues. The relationship between the migrants and the origin family is also the
same, unmarried daughters and their parents, without no left-behind children. Hence the
difference between migrants can be solely attributed to the characteristics of their origin
families.
5ThesugarcanecultivationwasonlysuccessfullyintroducedaroundcentralLaukkaibecauseoftheabun-
dant water supply in basin areas.
6For male migrants, there were only a few jobs to choose from. The most popular job is farm labors or
construction workers in the slack season, though the earnings is unstable and not high.
7This contexts also helped us to trace all the female migrants belonging to the surveyed households and
conduct detailed survey.
6
Another important fact of these villages is their patrilineal culture. Traditionally, women
do not inherit parent’s asset, and married daughters rarely transfer money to the origin
families as they have little bargaining power over the household (cid:12)nance. Hence we can
exclude inheritance motives of the remittance for female migrants in this region, which is
the oft-cited cause of positive association between remittance and household wealth levels in
previous literature (Bernheim et al., 1986; Hoddinott, 1994; De la Briere et al., 2002; Osili,
2007).
3.2 Household and migrant survey
In the selected seven villages, we randomly chose 256 households from the lists of house-
hold heads obtained from village leaders, consisting of 178 households with migrants and
78 households without migrants. By conducting interview with each household, we col-
lected information on the list of all the household members and the basic information of
each member, household income and asset levels, the size of the remittance, agricultural
production and labor arrangements of households, usage of remittance, and other household
demographics. Table 1 reports the summary statistics of household characteristics. As there
is no active market for land and other assets which could give us the monetary value of the
household assets, we constructed the household asset score using factor analysis based on
the information on land area, land evaluation reported by the village leaders, approximated
value of some assets (real estate, livestock, appliances, and vehicles), quantity of tea and
walnut trees, and social class evaluated by village leaders. It should be noted that our study
sites belong to a remote and poor region, and households with above average income are
still quiet poor. The average per capita income excluding remittance was only 488 yuan (70
US$) and even the 95 percentile value was only 3,062 yuan (442 US$). Hence the households
with high asset score should not be regarded as rich households. In the followings, we refer
to the households with high asset score as the better-off households.
The average years of education is only 0.36, and nearly 80% of the household head did
not receive any education. Even the most educated received only three-year education,
characterizing the backwardness of the region. Most household heads are married, and most
of them are male. While more than a half of the household heads did not have any migrant
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Table 1: Summary Statistics: Household level
count mean sd min max
Asset score 256 -0.00 0.96 -2.10 5.96
pre-transfer HH income pc 256 488.43 639.59 0.00 4526.14
Schooling years of HH head 256 0.36 0.77 0.00 3.00
Migrant experience of HH head(month) 256 7.90 13.02 0.00 60.00
Marital status of HH head 256 0.93 0.26 0.00 1.00
Gender of HH head 256 0.95 0.23 0.00 1.00
Number of unmarried female 256 0.69 0.70 0.00 3.00
Migration participation 256 0.70 0.46 0.00 1.00
Number of migrants 256 0.93 0.82 0.00 4.00
Number of female migrant 256 0.70 0.70 0.00 3.00
Paddy land area of HH head’s wife’s family when married 256 0.58 1.07 0.00 9.00
Note: 1) The asset score was calculated using factor analysis, based on the information on land
area, land evaluation, asset value (real estate, livestock, appliances, and vehicles), quantity of tea
and walnut trees, and social class evaluated by village leaders. 2) Marital status of HH head takes
the value of 1 if the household head was married, and 0 otherwise. 3) Gender of HH head takes
the value of one if the household head is male, and 0 if female.
experience, 30% of the household heads had the migrant experience no less than 12 months,
with the average migrant experience being 7.9 months. Most strikingly, when we compute
the ratio of migrating unmarried daughters, we found all the unmarried daughters in the
surveyed households are migrating. 8 The households which did not participate in migration
are those who have sons only or whose daughters had already married off or were still under
age.
After the household survey, we identi(cid:12)ed 254 migrants from 178 households, with 178
females and 76 males.9 172 females and 28 males of them migrated to Laukkai. 156 female
migrants, who account for 88% of the total, were employed as card dealers in casinos and the
rest worked in restaurants. As the postal system was not yet established and the transporta-
tion infrastructure was poor, remittances were brought home by the migrants themselves
when visiting their families during holidays. For the analysis, we restrict our sample to 148
unmarried female migrants who has no less than one year of migration experience in total
and worked as migrants no less than 10 months in 2014, because migrants who spent only a
8The unmarried daughters must be twelve years of age or older and the occupation is not student.
9Among 178 female migrants, 168 were unmarried daughters of the household heads. For the 76 male
migrants, 37 of them are the son of the household heads, 15 are the household heads themselves, and the
other are the brothers of the household heads.
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few months in Laukkai could not remit simply because they did not have a chance to visit
their families.
Table 2 provides a summary statistics of the 148 unmarried female migrants and their
families. In our study, migrants’ remittances include both cash and kinds. The kinds include
gifts for their families (more common for female migrants) and agricultural materials (such
as chemical fertilizer, pesticide, and seeds).10 Compared to the average household per capita
income reported in Table 1, the average remittance amount is quite large, more than three
times larger than the former. On average, the migrants remitted 16 percent of their annual
earnings, and saved additional 11 percent of their income for themselves. Although the wage
level is similar across migrants, we observe some variations in migrant’s income, mainly
due to the length of the working period in Laukkai. All the female migrants received some
(cid:12)nancial support from their families before they set off, with the average value of 335 yuan.
In 2014, respondent migrants visit their home on average 1.5 times, though 15% of the
respondents did not visit their home at all.
We also collected three variables which is speci(cid:12)c to the local context: how strongly the
migrants desired parents to pay dowries for them, how strong the parents were requesting
for remittance, and whether they returned home when a con(cid:13)ict occurred in Laukkai in
2015. Traditionally parents arrange marriage for their daughter, and pay dowry to the
bridegroom’s family. Better-off families tend to arrange marriage with better-off families
(assortative matching) and paid larger amount of dowry for their daughters. Poor families,
on the other hand, could only (cid:12)nd bridegrooms from poor families, with paying a much
smaller amount of dowry. Dowry is regarded as parent’s duty to the bridegroom’s family in
the surveyed villages, but if migrants by themselves (cid:12)nd their partners in Laukkai, then their
family usually would not be requested to pay dowry. Hence the desire for dowry variable
re(cid:13)ectsthemigrant’sdesireandexpectationfortheirparentsto(cid:12)ndgoodhusbandsforthem.
Another variable is the parents’ request for remittance. Parents, especially from better-off
families, occasionally visit their daughters at Laukkai to request or remind remittance, which
might affect remittance behavior. Better-off families more likely visit Laukkai for shopping,
business purpose, or social events such as marriage ceremony, and hence could partly explain
10Intheanalysisbelow,weconvertedthesematerialstomarketvaluetoincludethemintothe"remittance"
variable.
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Table 2: Summary Statistics: Female migrants
count mean sd min max
Remittance 148 2036.15 1577.58 0.00 6000.00
Remittance cash m 148 1767.36 1271.85 0.00 5400.00
Remittance gift m 148 269.46 425.39 0.00 2000.00
remittance pr 148 15.95 11.97 0.00 50.00
Migrant’s savings 148 1506.35 1430.02 0.00 6900.00
savings pr 148 11.47 10.82 0.00 69.00
Migrant’s income 148 12750.00 2258.72 8300.00 20000.00
Age of migrant 148 16.69 1.84 13.00 22.00
Schooling years of migrant 148 3.34 1.09 0.00 5.00
Migrant experience(month) 148 34.16 18.97 12.00 96.00
log(distance) 148 4.81 0.35 4.32 5.86
Asset score 148 0.10 1.11 -2.10 5.96
Economic support from parents 148 334.93 115.33 100.00 800.00
Frequency of visiting home 148 1.49 0.86 0.00 3.00
Desire for dowry paid by parents 148 1.14 1.08 0.00 3.00
Remittance request from parents 148 1.55 0.92 0.00 3.00
Back to family when con(cid:13)ict 146 0.75 0.43 0.00 1.00
Total consumption 148 9210.88 2707.49 3000.00 14700.00
Food consumption 148 2256.82 1113.86 0.00 7000.00
Room rent 148 811.49 1133.20 0.00 4000.00
Shopping consumption 148 4152.70 1883.75 0.00 10000.00
Entertainment 147 2003.40 1322.17 0.00 5000.00
Note: 1) Distance refers to distance from villages to migrants’ destinations (km). 2) Economic
support from parents include travel expenses and other expenses. 3) Frequency of home visits
refers to times of home visits of migrants in year 2014. 4) Desire for dowry from Parents refer
to desire of dowry paid by parents in the future: 3 indicates "great desire," 2 indicates "modest
desire," 1 indicates "little desire," 0 indicates "no desire."5) Remittance request from parents takes
the values from 0 to 3, where 3 indicates "strict request," 2 indicates "mild request," 1 indicates
"little request," and 0 indicates "no request." 6) Back to family when con(cid:13)ict dummy variable
refers to whether a migrant come back to her family during the con(cid:13)icts occurred in the beginning
of 2015.
10