Final Version World Bank Remittances and Life Cycle Deficits in Latin America

The paper investigates the effect of remittances on the coverage of financial deficits arising during youth and retirement years and their influence on some household behaviors. To this end, household survey information is used from Ecuador, Honduras, Mexico and Nicaragua to perform a number of econometric tests exploring the linkage between remittances and a battery of health, education and work outcomes dealing with young and elderly household members. The main overall finding is that, with variations across countries and regression specifications, remittances generally appear to exert a positive and robust impact. In particular, with few exceptions, remittances (a) respond to the lack of pensions and especially to overall household financial deficits; (b) encourage co-residence of the elderly with younger relatives; (c) facilitate elderly’s retirement; (d) increase household expenditures in health and education; (e) foster public and private school attendance, inhibits child labor, and improve anthropometric measures. (*) Insightful comments from Daniel Cotlear and Pablo Acosta are greatly acknowledged. Pablo Fajnzylber provided very valuable suggestions in discussing an earlier version presented at the Workshop o