Remittances, Household Welfare, and the COVID-19 Pandemic in Tajikistan

Abstract

Remittance inflows are now the largest source of external financing to developing countries, but little research has yet firmly established the effect of remittances on household welfare. We investigate the case of Tajikistan, one of the most heavily remittance-dependent countries in the world. We use a panel dataset collected nationwide and employ an instrumental variable estimation to confirm a positive relationship between receiving remittances and household welfare after correcting for endogeneity. Moreover, we find that the effect of remittances on household spending is more pronounced in households whose head is male, older, and/or less educated. Then, we combine our estimated coefficients with the projected decline of remittance inflows as a result of the coronavirus disease (COVID-19) outbreak and show the pandemic’s adverse effect on household spending per capita.