Remittances in Georgia: Correlates, Economic Impact, and Social Capital Formation

Theodore P. Gerber, University of Wisconsin at Madison
Karine Torosyan, International School of Economics in Tbilisi

We use a new survey, "Georgia on the Move," to examine migrant-level, household-level, and contextual variables associated with the probability that a Georgian household receives remittances. We then apply propensity score matching to estimate more precisely than is usually possible how remittances affect particular types of household expenditures, savings, labor supply, health, and other measures of well being. Separate analysis of the sub-sample of households with a migrant currently abroad distinguishes the effects of remittances from the effects of migration as such. In Georgia remittances improve household economic well-being without, for the most part, producing the negative consequences often suggested in the literature. Remittances have a stronger impact in urban settings than in rural areas. We find evidence for a previously neglected and potentially important aspect of remittances: they foster the formation of social capital by increasing the amount of money that households give as gifts to other households.