Negative shocks travel home: the income elasticity of remittances in a temporary migration scheme

Using high-frequency financial diaries from Fijian temporary migrant workers in Australia and their families back home, we estimate the within-individual income elasticity of remittances at approximately 0.3 and a marginal propensity to consume remittance income at around 0.7. Migrants send regular, stable amounts home, regardless of their earnings level: remittance budget shares in our sample fall with income, resembling Engel's Law. Exploiting fortnightly variation within individuals, we find that the contemporaneous elasticity is driven by negative shocks, while positive shocks are absorbed with higher consumption or savings abroad. The immediate pass-through of earnings declines to families, for whom remittances are typically the primary and often only source of income, has direct implications for worker welfare protections and the vulnerability of remittance receiving households.

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