All specifications include geographical zone fixed effects and standard errors are clustered at the province level (Moulton, 1990).<sup>34</sup> Sampling weights are also used to account for the features of complex survey data (Kish and Frankel, 1974; Holt, Smith, and Winter, 1980).

If the amount of garment remittances is doubled, then households enjoy a 9.1 percent increase in their monthly per capita consumption. Similarly, food expenditure, which accounts for 57 percent of total expenditure, also increases with remittances: a 100 percent rise in garment transfers translates into a 7.5 percent increase in food spending. For both regressions, the Kleibergen-Paap F-statistic for weak identification<sup>35</sup> stands at 24.60 and exceeds the Stock and Yogo critical values (9.08 percent for the maximum IV relative bias and 22.30 for the maximum IV size), rejecting the hypothesis of weak instruments. Similarly, the p-values associated with the overidentification test are above the threshold of 0.10, signaling that the instruments are exogenous. Although the magnitude of the coefficients is modest, these findings are consistent with Orozco (2003) who shows that Mexican households spend a large share of the remittances they receive on food items. However, we do not find an impact on leisure activities, as Tabuga (2007) does in the case of the Philippines. Also, miscellaneous expenditures such as contributions to funeral rituals and wedding ceremonies witness a 33.3 percent increase following a twofold rise in garment remittances (Col. 9).

Table 5 also provides evidence on the productive use of garment remittances. A 10 percent increase in transfers raises education expenditure by 8.7 percent (Col. 3). This positive effect on human capital investment is in line with Kifle (2007) who shows that remittance-recipient Eritrean households tend to spend more on education. Cardona Sosa and Medina (2006) and Adams and Cuecuecha (2010) find similar expenditure patterns for households in Colombia and Guatemala respectively. Furthermore, remittances originating from the textile and apparel industry increase health expenditures per capita by 1.8 percent (Col. 4),<sup>36</sup> consistent with Amuedo-Dorantes and Pozo (2011) and Valero-Gil (2009). In contrast, a doubling of garment remittances seems to deter per capita spending in transportation and communication which falls by 24 percent (Col. 6), but in this specification the quality of the instruments is not satisfactory. In addition, the impact on per capita expenditures on durables is not statistically significant but turns positive when asset accumulation is proxied by the share of durable goods owned by the household. These results broadly hold when the amount of remittances is normalized by the household size or by the number of migrants that send money.<sup>37</sup> Table 6 reports the non-trivial causal effect of garment remittances on productive agricultural investments. A twofold increase in transfers raises aggregate per capita expenditures related to farming activities by 36.6 percent (Col. 1), providing additional support to the hypothesis on the productive use of remittances. Specifically, per capita costs incurred in crop cultivation and those pertaining to livestock

> 34Clustering at the province level relaxes the independence assumption of errors and requires only that households be independent across provinces. Cluster-robust standard errors are robust to both arbitrary heteroskedasticity and intraprovince correlation. Several studies have discussed the implications of failure to control for within-cluster correlation (Bertrand, Duflo, and Mullainathan, 2004; Wooldridge, 2010).

> 35Since standard errors are clustered at the province level, the Cragg-Donald-based weak instruments test is no longer valid and the Kleibergen-Paap F-statistic is used instead (Baum, Schaffer, and Stillman, 2007).

> 36 However, our instruments for remittances seem to perform poorly, especially for health expenditures, probably due to the reduction in sample size.

> 37Output tables were not included for the sake of space but are available upon request.

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