The income elasticity of remittances: new evidence from financial diaries

Using high-frequency financial diaries data from Fijians working in Australia as part of the Pacific Australia Labour Mobility scheme, we examine whether migrants send more money home when they earn more. Regardless of whether PALM migrants earn more or less in Australia over their stay, they tend to send the same regular amounts home to support their families. Exploiting variation within individual migrants over time, we estimate an income elasticity of remittances of around 0.3. These contemporaneous responses are driven by negative shocks, suggesting an immediate pass-through to families back home, where remittances are the main source of income.