Why Do Migrants Remit? Empirical Evidence from Kenya

Abstract

Aims: Remittances both external and internal are very important to the Kenyan economy. In view of this, this study improves the understanding of the drivers of remittances in Kenya. In addition, the study empirically tests the main theories of remittances namely altruism, self interest and implicit contractual agreement. Methodology: This paper analyzes migrant’s remittance behaviour in Kenya using household survey data from World Bank 2009 African Migration Project. Since a large share of migrants does not remit, Heckman sample selection model is suggested and estimated using Limited Information Maximum Likelihood method. Results: The results show that external migrants have a higher probability to remit and, on average send higher levels of remittances back home relative to internal migrants. Internal and external migrants with higher levels of education prior to migration and employed migrants remit more both at extensive and intensive margins. External migrants have a higher probability to remit and send larger amounts of money to higher-income households while internal migrants have a higher probability to remit and send higher levels to lower-income households. Conclusion: Therefore, the empirical results suggest that internal and external remittances are motivated by altruism and inter-temporal contractual agreement between a migrant and the household. The results also provide support for external remittances as being motivated by self-interest.