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Do Social Transfers “Crowd-Out” Remittances: Evidence from Bosnia

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Name of the Asset | Do Social Transfers “Crowd-Out” Remittances: Evidence from Bosnia
Type of Asset | Working Paper
Date | December 2011

Summary

Bosnia-Herzegovina has gone through very dramatic periods of conflict and displacement. During the period of war, about 5% of the population was killed, and more than a half of its population was displaced, with many living abroad. This paper attempts to investigate the presence of the “crowding out” effect in Bosnia by analyzing a model of interaction between social transfers – such as pensions or health care services – and remittances, using the two-stage Heckman’s selection method.

Findings show that remittance receipts increase as social transfers increase. This means that social transfers “crowd in” rather than “crowd out” remittances, and that remittances to poor people are not primarily altruistically motivated. In fact, remittances sent to the non-poor are driven by an exchange motive. The study thus provides useful insight into the existence of relationship between these two types of transfers, in the context of poverty reduction.

Authors | Nermin Oruc, Sarajevo School of Science and Technology, Bistrik
Country and/or Region | Bosnia
Name of the Program | Regional Research Competition
Funder(s) |  Jubiläumsfonds of the Austrian National Bank (OeNB) and the Austrian Ministry of Finance

Download the Full Study here

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