Migration is an important component of the Sri Lankan economy. Despite its potential, the country’s migration often results in unsustainable socio-economic progress of migrants and their households. This study investigates the causal impact of migration on savings and borrowing behaviour of left behind members in migrant households. The study adopts a propensity score matching methodology using data from the Consumer Finance and Socio Economic (CFS) Survey of 2003/4 conducted by the Central Bank of Sri Lanka. The preliminary findings of the study show a negative causal effect of migration on informal savings and total borrowings. This lower level of savings and borrowings caused by migration provide initial quantitative evidence in support of the hypothesis that migrant households thrive while migrant is at destination, but their socioeconomic progress dwindles with the return of the migrant and the end of the inflow of remittance stream. The principal agent problem and the associated moral hazard between migrant and left behind family hinder the realization of full potential of migration.
Does Remittances Alter Saving and Borrowing Behavior of Family Left Behind?