The development impact of workers' remittances in Fiji : a thesis presented in partial fulfilment of the requirements for the degree of Master of Arts at Massey University, Palmerston North, New Zealand
Remittances by international migrants have become an important source of finance for
livelihood development amongst the households in Fiji. This is substantiated by the
country’s rising migrant stock as a result of unstable political environment and the
increasing economic opportunities for skilled manpower. It has been noted that the flow
of remittances to Fiji excelled the amount of other capital inflows such as foreign aid
and foreign direct investment and have surpassed commodity export earnings in the
recent years. This has made remittances the second largest foreign exchange earner in
Fiji after tourism.
This thesis examines the developmental impact of workers’ remittances in Fiji,
particularly its impact on economic growth, financial sector development, welfare
development of the recipient households and an examination of the sustainability of
remittance flows. Using an extended neoclassical framework, the empirical evidence
finds a positive impact of remittances on economic growth and financial sector
development. The welfare development hypothesis is tested using the Household
Income and Expenditure Survey (HIES) data. This is analyzed first, by examining the
expenditure patterns of the remittance-recipient households, the poverty and inequality
effects followed by an assessment of human capital development impact of remittances.
The empirical results show that households which receive remittances do not only
expend their remittance income on basic consumption but have other substantive uses
such as that on education of children, housing and expenditure on durables and nondurables.
The poverty and inequality reducing effects of remittances, employ two
counterfactual methodologies to estimate first, what the poverty and inequality
indicators would be in a scenario where remittances are treated as an exogenous
addition to household income. Second, it tests the effect in a scenario without migration
and remittances, which treats remittances as a substitute for migrants’ foregone
earnings. The results show strong poverty reducing effects of remittances irrespective of
the methodology used while the effects on income distribution are not unambiguous.
The results obtained for the human capital development analysis indicate the positive
role of remittances in providing education opportunities for children in the recipient
In noting these positive effects of remittances, it must however be acknowledged that
the flow of remittances has to be sustainable overtime for households to benefit from
human development. From a survey of Fijian-New Zealander migrant households, this
study examines the remittance-sustainability debate. The results suggest that a
combination of factors such as income of migrants, acquisition of higher education prior
to migration and the intention to inherit assets from families in Fiji contribute to
continued flow of remittances. These results do not support the hypothesis of remittance
decay amongst Fijian migrants in New Zealand but reflect a strong altruistic motive of
remittances sent to households in Fiji as insurance against economic shocks. This
highlights the importance of development policy in facilitating the flows of migrant
remittances for the socio-economic progress of Fiji.