Remittances, Liquidity Constraints and Human Capital Investments in Ecuador

By Carla Calero, A. S. Bedi, Robert Sparrow. Social Science Research Network, 2009

330 citations recorded by the source corpus.

Over the last decade Ecuador has experienced a strong increase in financial transfers from migrated workers, amounting to 6.4 percent of GDP and 31.5 percent of total exports of goods and services in 2005. This paper investigates how remittances via trans-national networks affect human capital investments through relaxing resource constraints and facilitate households in consumption smoothing by reducing vulnerability to economic shocks. In particular, we explore the effects of remittances on school enrolment and child work in Ecuador. Identification relies on instrumental variables, exploiting information on source countries of remittances and regional variation in the availability of bank offices that function as formal channels for sending remittances. Our results show that remittances increase school enrolment and decrease incidence of child work, especially for girls and in rural areas. Furthermore, we find that aggregate shocks are associated with increased work activities, while remittances are used to finance education when households are faced with these shocks. This suggests that liquidity constraints and vulnerability to covariate risk are especially relevant in rural areas, as it affects household’s investments in human capital of school age children. In this context both child labour supply and transnational remittances serve as coping mechanisms.

Subfields: Safety Research, Sociology and Political Science, Soil Science

View Paper: https://www.semanticscholar.org/paper/88446ddf7f407c6e0bc17b397dde4c6acfbf78eb

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Citations in the corpus

Do remittances promote financial development (2011, positive): “…issue is important because financial development has been shown to foster growth and reduce poverty.3 Furthermore, this question is relevant since some , Acosta et al. (2007), Calero et al. (2009), Adams and Cuecuecha rantes and Pozo (forthcoming), and Bredl (forthcoming) analyze nces on education.”
Evaluating the Economic Impact of International Remittances On Developing Countries Using Household Surveys: A Literature Review (2011, neutral): “In a more recent study using nationally-representative household data from Ecuador, Calero et al. (2009) also find that international remittances have a positive effect on school enrolment, especially for girls and in rural areas.”
Migrants’ International Transfers and Educational Expenditure: Empirical Evidence from Albania (2010, neutral): “Calero et al (2008) investigate the effect of remittances on the probability of being enrolled in school in Ecuador.”
Children's Schooling and Parental Migration: Empirical Evidence on the 'Left Behind' Generation in Albania (2010, positive): “For example Edwards and Ureta (2003) in a study based on data from El Salvador found that remittances reduced the hazard of school drop-outs and Calero et al. (2009) similarly show that remittances increased school enrolment and reduced child labour in Ecuador. The theoretical literature on “benefic”
International Remittances and Human Capital Formation (2014, positive): “To address these problems, I follow the literature and include an index for household assets as a proxy for household income (Calero et al., 2008; Hu, 2012).”