1.
Summary
The paper investigates the motivations behind migrants' remittances, focusing on Botswana. It
challenges the traditional view that remittances are solely motivated by altruism, introducing a
more nuanced perspective involving tempered altruism or enlightened self-interest. The study
examines remittances as part of a self-enforcing contract between migrants and their families,
where remittances are seen as a means of income redistribution and risk-sharing. Using data
from the National Migration Study of Botswana (1978-79), the paper explores the interplay of
various factors, including altruism, self-interest, and contractual arrangements, in shaping
remittance behavior.
2. Author's Objectives
The authors aim to:
Develop a comprehensive theoretical framework explaining remittance behavior, moving
beyond the simplistic altruism vs. self-interest dichotomy.
Test the hypothesis that remittances are influenced by a combination of altruistic motives,
self-interested investments, and mutual risk-sharing contracts.
Provide empirical evidence from Botswana to validate the theoretical predictions and
explore how remittance patterns vary across different household structures and economic
contexts.
3. Methodology
The paper employs a mixed-methods approach, combining theoretical modeling with
empirical analysis.
Theoretical Models: It introduces three primary motivations for remittances:
Pure Altruism – Remittances as a result of care and concern for family members
left behind.
Pure Self-Interest – Motivated by expectations of inheritance, investments, or
maintaining social ties.
Tempered Altruism/Enlightened Self-Interest – Remittances as part of a self-
enforcing contract for mutual benefit, including risk-sharing and repayment of
educational investments.
Empirical Analysis:
Data Source: The study uses detailed household survey data from the National
Migration Study of Botswana (1978-79).
Econometric Model: A complex remittance function is estimated, incorporating
variables like migrant’s wage, household income, household size, education
level, drought index, and cattle ownership.
Interaction Terms: The model includes interaction terms to capture the influence
of family ties, economic conditions, and cultural factors.
4. Key Findings
Altruism Alone is Insufficient – The data does not fully support the altruism hypothesis,
as remittances were not consistently higher to lower-income households.
Self-Interest and Risk-Sharing – Remittances were higher in households with larger
herds of cattle, suggesting a link to inheritance motives or investment maintenance.
During periods of drought, remittances increased, supporting the risk-sharing
hypothesis.
Educational Investments – Remittances were higher among migrants whose education
was likely financed by their families, indicating a repayment motive.
Duration of Absence and Remittance Patterns – Remittances did not decline in the
short-term, contradicting the “out of sight, out of mind” hypothesis, but showed a
decreasing trend after five years of absence.
5. Relevance to Developing Countries
The study’s findings are highly relevant to developing countries, particularly in Africa, where
remittances play a crucial role in poverty alleviation and economic development. The following
can be gathered as relevance of the paper to developing countries:
Income Redistribution: Remittances provide a private mechanism for income
redistribution, supporting consumption and capital investments in rural areas.
Risk Diversification and Insurance: In the absence of formal insurance and capital
markets, remittances serve as an informal insurance mechanism, helping households
mitigate risks associated with economic shocks, such as droughts.
Human Capital Development: The repayment of educational investments highlights the
role of remittances in supporting human capital development.
6. Strengths
Comprehensive Theoretical Framework: The paper moves beyond the simplistic
altruism-self-interest debate by introducing a nuanced model of tempered altruism and
enlightened self-interest.
Robust Empirical Analysis: The use of detailed household survey data and sophisticated
econometric modeling enhances the reliability and validity of the findings.
Policy Implications: The study provides valuable insights for policymakers seeking to
leverage remittances for economic development, particularly in designing policies to
enhance financial inclusion and social protection.
7. Weaknesses
Data Limitations: The cross-sectional data limits the ability to capture dynamic changes
in remittance behavior over time. Longitudinal data would provide more robust evidence
of intertemporal contractual arrangements.
Cultural Context: The findings are specific to Botswana, where cultural norms around
inheritance and family obligations influence remittance behavior. . By focusing primarily
on economic drivers, the authors may have overlooked important sociocultural
dimensions that influence remittance behavior, particularly in non-Western or traditional
societies. This omission limits the global applicability of the framework and may require
modifications for different cultural contexts
Unobserved Heterogeneity: The model does not fully account for unobserved
heterogeneity. Factors such as individual preferences, psychological motivations, or
unmeasured household dynamics can significantly impact remittance decisions. While the
paper acknowledges some degree of heterogeneity, the lack of mechanisms to control for
these unobserved factors leaves room for omitted variable bias. This limitation may cause
certain findings to be less precise or overly generalized
8.1 Policy Implications
The study suggests that enhancing financial infrastructure and reducing transaction costs
can optimize the benefits of remittances for economic development.
Policymakers should consider the dual role of remittances in income redistribution and
risk-sharing when designing social protection systems.
8.2 Contribution to Literature
This paper makes a significant contribution to the remittance literature by integrating
insights from development economics, behavioral economics, and household decision-
making models.
It bridges the gap between economic theory and empirical evidence, offering a holistic
understanding of remittance behavior.
9. Conclusion
This paper by Lucas and Stark provides a groundbreaking analysis of the motivations behind
remittances, challenging conventional theories by proposing a model of tempered altruism and
enlightened self-interest. The empirical evidence from Botswana demonstrates the complexity
of remittance behavior, driven by a combination of altruistic motives, self-interest, and
intertemporal contractual arrangements.
The study’s nuanced approach provides a valuable framework for understanding the socio-
economic impact of remittances in developing countries, particularly in contexts of economic
uncertainty and incomplete markets. Despite its limitations, the paper remains a seminal
contribution to the literature on migration and remittances.
References
Lucas, R. E., & Stark, O. (1985). Motivations to remit: Evidence from Botswana. Journal of
political Economy, 93(5), 901-918.
