External Migrant Remittances And Household Expenditure Patterns In Ghana

Abstract

Research into expenditure patterns of households using external remittances for consumption or investment purpose has gained prominent attention in academic and policy circles recently. This study joins the debate to analyze the relationship between external migrant remittances and household expenditure patterns in Ghana. The study looks at key consumption and investment variables namely food, utilities, education, health, agriculture and housing to assess the expenditure behavior of households with remittance income. The study applies the Tobit Model technique. Using the Ghana Living Standard Survey data (GLSS 5), it finds that households who receive external remittances decrease their budgetshares on consumption and some investment goods but increase their budget share on particularly housing than households without remittance income. The study lends to the view that remittances cannot support to build the level of human capital and entrepreneurial investment in remittance –receiving nations; and point to the non-productive use of remittances in Ghana. To achieve economic growth and development with remittance income some actions should be taken. This would be possible within an enhanced government policy framework with the active participation of the financial sector in the country. This study recommends suitable policies such as reduction in leakages in transfers through informal channels, reducing cost of transfers, enabling the financial sector to innovate profitable instruments to attract remittances into savings and to boost financial deepening, and above all creating a sound macro-economic environment by Government.