Mental Accounting and Remittances: A Study of Malawian Households

Simon Davies (), Joshy Easaw and Atanu Ghoshray

MPRA Paper from University Library of Munich, Germany

Abstract: In this paper we use a behavioural approach to studying household consumption behaviour in Malawi. In particular we are interested to know whether households use mental accounting when consuming different categories of good. It is useful for assessing the impact of remittances on household consumption behaviour. We use 1998 cross-sectional data to find the following key results: (i) mental accounting systems are in operation. Remittance income exhibits a high marginal propensity to save, (ii) household income influences consumption habits, (iii) receipt of remittance income impacts on saving and spending habits. This is in line with the theory of remittances and corresponding mental accounting theory, and, finally, (iv) both remittances and loans are used for consumption smoothing and investment purposes.

Keywords: Remittances; Household Behaviour; Consumer Economics; Economic Development; Africa; Malawi (search for similar items in EconPapers)
JEL-codes: D1 D12 O15 (search for similar items in EconPapers)
Date: 2006-10
New Economics Papers: this item is included in nep-afr, nep-cbe, nep-dev, nep-mfd and nep-mig
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://mpra.ub.uni-muenchen.de/5206/1/MPRA_paper_5206.pdf revised version (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:3603

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