Remittances, Consumption Insurance and Family Labour Supply

This thesis presents three substantive chapters on the economics of households. The objectives are to quantitatively examine if remittances are a source of insurance for recipient households, and to explore how remittance income alters family time allocation between market and home production activities. The first substantive chapter presents stylized facts on the properties and distribution of remittance flows to developing economies. Here, I document the nature and increasing share of remittances relative to other forms of international capital flows to developing countries. This chapter also studies the dynamics of household earnings, consumption and income from home production using monthly household-level panel data from the Townsend Thai survey. The second substantive chapter examines remittances as a source of insurance for recipient households. I specify a fairly standard model that incorporates households' labour supply and consumption decisions, and derived analytical expressions for consumption and earnings as a function of wage and remittance income shocks. These expressions are empirically estimated to explore whether the presence of remittances alters the degree of household consumption smoothing. Our model predicts that households have higher access to smooth consumption against transitory wage shocks than against permanent shocks. In particular, I find that 72% of family consumption smoothing is explain by households' self-insurance behaviour through asset accumulation. On the other hand, remittances only explain 11% of consumption smoothing against wage shocks. Interestingly, households with low educational attainment rely more on remittances as a source of insurance while those with higher education levels have higher access to smooth consumption via asset accumulation. The final chapter builds on the model developed in the previous chapter to examine the effect of remittances on households' time allocation between market and home production activities. This model was modified by giving households the opportunity to involve in home production, either for home consumption or for the market. The derived expressions are also estimated using data from the Townsend Thai survey to examine whether the presence of remittances affects family time allocation. By decomposing the response of labour hours to wage and remittance shocks, I find no support that increased remittance income leads to lower labour effort among Thai households. On the contrary, increased remittance income induces Thai households to reallocate labour hours from market to home production activities.