Some Tests for Differences in Consumption Patterns: The Impact of Remittances Using Household Income and Expenditure Survey Data of Pakistan 1987-88

It is argued generally that the observed pattern of use of remittances! by emigrant families reduces their effectiveness for economic development and growth. A large school of thought believes that a considerable portion of the remittance money is spent on raising current consumption, in making unproductive investment in real estate such as residential houses, and in acquiring consumer durables, etc. Such expenditure, apart from being inflationary in nature, also has a strong demonstration effect on the consumption patterns of families that do not receive remittances. Another aspect of the alleged consumption-oriented use of remittances is the relatively high import content of the consumption demand generated by remitted funds. This has the adverse implication of offsetting some of the balance of payments gains. There is, therefore, a need to critically examine the utilisation pattern of remittances in terms of statistically testing for differences in consumption behaviour between households that receive remittances and those that do not. This study attempts such an analysis based on the data from the Household Income and Expenditure Survey of 1987-88.