Familial Relationship of Migrants and Remittances Behavior: Theory and Evidence from Ecuador

This paper develops a simple analytical model with altruistically motivated remittances to analyze the determinants of remittances using household data from Ecuador. The model predicts that migrant remittance behavior and household migration size are non-monotonically correlated. The empirical work suggests that migrant remittances are a non-increasing function of the number of migrants within the household. If there is a positive selection of migrants, then one would expect that the forgone household income due to migration is higher than when there is a negative selection. According to the Ecuadorian data of households with at least 1 migrant, prior to migration the individuals who left had a higher education level than those relatives left behind. The average years of schooling of the migrants are 3.5 years, higher than the non-migrants. It seems that when migration size changes from 2 to 3 and from 3 to 4 migrants within the same household, the forgone household income due to migration might have a positive effect on altruistically motivated remittances, which compensates for the negative effect of the increased number of migrants on the individual amount of remittances (Nash assumption). The results of allowing a non-linear relationship between migrant remittance behavior and household migration are partially distinguished from those reached when there is a linear relationship and also contrast with the predictions of rent-seeking literature. Moreover, it shows that Ecuadorian migrants who moved to Spain were less likely to remit and remit less than those migrants whose destination country was the United States.