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The authors study the determinants of remittances to developing countries at different time horizons. Remittances to developing countries nowadays exceed official development assistance and constitute a significant fraction of the disposable income of many households in developing countries. Different hypotheses suggest that remittances are often sent to compensate for low incomes, which may impose a downward bias when estimating their effects on the economic development (e.g. growth, poverty and consumption) in recipient countries. Two popular hypotheses about the causes of remittances are the altruism and insurance hypothesis.
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