# WPS4249

With the assumption stated before concerning migrant characteristics, these coefficients are used in order to impute the counterfactual non-remittances per capita household income for recipient families. With this variable one can proceed to calculate the levels of poverty and inequality that would have prevailed had migration and remittances not taken place. It must be noted, however, that as mentioned by Rodriguez (1998) the variance of the counterfactual income predicted on the basis of observable household characteristics is artificially small, because it ignores unobserved determinants of income.

A potential solution proposed by Barham and Boucher (1998) is to add to the predicted household income a random error component drawn from a distribution with the same properties (mean, variance) of the actual estimated errors. We pursue this approach and obtain 1,000 different estimates of the imputed counterfactual non-remittances income for families with migrants, and the same number of estimates for the poverty and inequality levels that would have prevailed in the above counterfactual scenario. This allows us to report not only point estimates for those variables but also 95% confident intervals, based on the 25th and 975th estimates of the variables – after sorting them ascending order.

## **5. HOUSEHOLD SURVEY DATA AND RESULTS**

## _(a) Data_

We use household surveys data for 10 Latin American and Caribbean countries: Bolivia, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Paraguay and Peru. These countries were selected as they have recent household survey data with questions on remittance receipts. Our interest in these countries is also driven by the fact that, as it emerges from Figure 1, most rank among the top receivers in the region in terms of remittances to GDP ratio in 2004 (Haiti, Honduras, El Salvador, Guatemala, Nicaragua, and Ecuador). Moreover, as shown in the lower panel of figure 1, Mexico is the top LAC receiver of remittances and one of the world’s top receivers in absolute terms (18.1 billion USD in 2004). Finally, Paraguay, Bolivia and Peru are also interesting cases as they generate considerable flows of South-South migration, which we are interested in comparing with the more traditional South-North pattern.

All the household surveys that we employ are nationally representative, they were performed between 2000 and 2004, and contain information on the amount of foreign remittances. It must be noted, however, that none of these surveys has a panel structure (i.e. none follows the same household over time) and only two contains detailed information on migrants (Haiti and Nicaragua). Household surveys are not uniform across countries. The issue of comparability is of great concern, although we have made all possible efforts by using similar definition of variables in each survey. Table 4 provides details on the household surveys employed.. In the definition of household income, in general all income sources are considered, with the exception of imputed own-housing rent.<sup>26</sup>

## TABLE 4 HERE

> 26 The concepts employed for defining non-remittances income and the questions used to collect information on remittances are available upon request.

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