Economics

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Remittances and Agricultural Productivity in Rural China
(2013) Barnett, Ezekiel; Preston, Anne Elizabeth
This research examines the productivity behavior of remittance receiving households in rural China using a nationally representative survey undertaken in 2002. I compare the agricultural productivity behavior of Chinese rural households that receive remittances with those that do not. First, I find that migrant sending and remittance receiving households are poorer, older, and less productive than average, but have slightly above average income because of the remittance flows they receive. To see if remitted income damages the effort or productivity of rural households, I utilize two empirical strategies: first a standard OLS and then a two-stage least squares (2SLS) with a strong instrumental variable (IV). In the OLS, I find that holding fixed other characteristics; households that receive remittances significantly less productive than their remittance-less counterparts. In the second specification, no significant signs on remittances or migration are found except for households engaged in grain production. An analysis of expenditure patterns demonstrates that remittance-receiving households spend more on luxury consumption, and slightly less on productive investment. These findings suggest that many rural Chinese households may not use migration as a method to overcome financial constraints on investment, but instead use it as a method to improve overall welfare.