Remittances and household consumption expenditure patterns in Uganda: Evidence from the 2009/2010 UNHS data.

Abstract

The objective of the study was to assess the relationship between remittances and household consumption expenditure patterns in Uganda. The investigations were based on merged secondary data from Uganda National Household Survey data of 2009/10 by the Uganda Bureau of Statistics to specifically assess the differences in household consumption expenditure patterns for household heads that received remittances and those that did not receive remittances. A Propensity Score Matching method which quantifies the average treatment effects related to the receipt of remittances by matching household heads that received remittances with household heads that have similar characteristics and did not receive remittances.

The results of the frequency distributions indicate that there are significant differences in the distribution of the characteristics of the head. The influence of explanatory variables suggests that the most significant determinant of remittances are region, place of residence, household size, subsistence farming, commercial farming, gender, age, employment status, not engaged in agri-businesses, age squared, and educational level attained. The results of the budget shares of four expenditure categories reveal that the main components of the mean budget are food and non-food consumption, which account for 74.2 percent and 73.7 percent for household heads receiving remittances and household heads that do not receive remittances respectively. The expenditures on health and education account for 25.8 percent and 43.2 respectively. The results of the average treatment effects suggest that consumption expenditure tends to reduce significantly with the receipt of remittances. On the other hand, results for the investment expenditure categories reveals that the receipt of remittances increases investment expenditures by over 3 percentage points.

These findings, therefore, point to the following recommendations: (i) The government needs to increase public expenditures on education, health and agriculture so as to mitigate the effect of increased private expenditures and improve the health and education systems which are particularly important for generating a more productive work force in the future and thus have implications for poverty reduction efforts. (ii) Government should introduce measures that compel households to invest the incomes received as remittances so as to spur private sector growth as an engine of development.