A Model of Migrants' Remittances with Human Capital Investment and Intrafamilial Transfers

Abstract

This study analyzes data on migrants' remittances using a two-period theory of intergenerational transfers based on an informal, intrafamilial loan arrangement using “weak altruism,” a behavior between “strong altruism” and pure self-interest. The model provides an integrated theory of migrants' remittances, human capital investment decisions, and intrafamilial transfers applicable to low-income countries with no official pension schemes and imperfect capital markets. Propositions, derived from the theory, are tested, re-analyzing original survey data on remittances of Pacific island migrants in Sydney. When weak altruism and strong altruism yield opposite predictions, the econometric results tend to confirm the former hypothesis and invalidate the latter.