The Effect of Remittances on Investments in Housing: Evidence from Nicaragua

Mary Arends-Kuenning, University of Illinois at Urbana-Champaign
Suzanne Duryea, Inter-American Development Bank
Analia Olgiati, Inter-American Development Bank

Remittances play an increasingly important role in Nicaragua’s economy. While some argue that housing is a less productive use for remittances than other areas, improvements in specific housing outcomes may generate important productivity gains. Particular improvements, such as covering dirt floors, are associated with gains in health outcomes. Hernando de Soto links home ownership to the ability of the poor to use assets for collateral. This paper will exploit the panel nature of the 1998 and 2001 LSMS surveys to examine the impact of remittances on investments in housing. We will examine changes in housing outcomes between 1998 and 2001, including home ownership, and whether improvements/repairs have been made in the last 12 months leading up to the 2001 survey. We will examine whether the changes in these outcomes are related to changes in remittances, defined by having a family member who migrated between since 1998 and who sent remittances.