A theory of remittances as an implicit family loan arrangement

The idea of an implicit and informal loan agreement between family members to explain migrants' remittances is not new, but its implications have not been fully explored in the theoretical literature. Many empirically testable propositions may be derived from this hypothesis when trying to explain why emigrants remit, what the time profile of remittances is, how it depends on the intent to stay, on the expected length of stay, and on interest rates; what use people make of remittances,and how the home family consumption behavior is affected by the economic prospects in the receiving country. Furthermore, this theory yields many interesting policy prescriptions for less developed countries wishing to maximize the remittance flow from emigrants. (C) 1997 Elsevier Science Ltd.