Where did all the remittances go? Understanding the impact of remittances on consumption patterns in rural China

Yu Zhu (Lead / Corresponding author), Zhongmin Wu, Liquan Peng, Laiyun Sheng

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    We focus on the impact of migrants’ remittances on consumption patterns in China. Using a large homogenous sample of rural households surveyed in 2001 and 2004, we find that remittances are spent on nonhousing consumption expenditures at the margin, virtually dollar-for-dollar, when we instrument remittances and local employed earnings using proxies of social networks. Our findings are robust to intra-household division of labour and to fixed-effect for the county in which the respondents are registered. These results imply that rural households largely take remittances as permanent income and are consistent with the prevalence of circular and repeat migration in China.
    Original languageEnglish
    Pages (from-to)1312–1322
    Number of pages11
    JournalApplied Economics
    Issue number12
    Publication statusPublished - 2014



    • Rural–urban migration
    • Remittances
    • Consumption patterns
    • Fixedeffect instrumental-variables estimation
    • China

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