We estimate a remittance model in which we address endogeneity and reverse causality relationships between immigrants’ remittances, pre-transfer income and consumption. In order to take into account the fact that a large share of individuals do not remit, instrumental variable variants of the double-hurdle and Heckit selection models are proposed and estimated by Limited Information ML; semiparametric extensions are considered as robustness checks. Our results for a sample of recent immigrants to Australia show that endogeneity is substantial and that estimates obtained by the methods previously employed in the literature may be misleading if given a behavioral interpretation.
Endogeneity and sample selection in a model for remittances / Bettin, Giulia; Lucchetti, Riccardo; Zazzaro, Alberto. - In: JOURNAL OF DEVELOPMENT ECONOMICS. - ISSN 0304-3878. - STAMPA. - 99:2(2012), pp. 370-384. [10.1016/j.jdeveco.2012.05.001]