Asymmetric Information about Migrant Earnings and Remittance Flows

Transnational families where one or more members are employed abroad while others remain back home are likely be characterized by a higher degree of private information relative to households where members are co-resident. Consequently, international migrants, who can only imperfectly monitor and control uses of remittances by family members left behind, may remit less money home if intra-household preferences differ. On the other hand, a sending household's inability to monitor the migrant's financial choices may enable him to privately spend more, thereby remitting less. Using a novel dataset of married male Indian migrants working in Qatar and their wives back home that were interviewed simultaneously but separately, the extent of information asymmetry with respect to overseas earnings is measured by the discrepancy between migrant's report of his earnings and his wife's account. We find that the greater the under-reporting of overseas income by the wife, expressed as a ratio of her account to his own, the lower the annual remittances sent home. The finding demonstrates how remittance flows can be affected by the presence of information gaps arising from imperfect monitoring of intra-household allocations. It also shows the mechanism by which remitters may vary the amount transferred home by exploiting the incomplete information recipients have of foreign earnings. Interventions that improve monitoring of intra-household allocations could potentially enhance the amount of remittances sent.