Remittances as a social status signaling device

Like all human beings, migrants may have a concern about their prestige or social status in the eyes of left-home family and friends. They can remit money in order to signal their economic success and increase their status. We show that if migrants’ income is private information, unsuccessful migrants might accept a worsening of their living conditions and send back home large amounts of remittances only in order to make residents believe that they are successful. In some cases, successful migrants can signal their true favorable economic situation by remitting an even larger amount. The game presents various equilibria that differ with respect to the proportion and nature of the migrants who sacrifice consumption opportunities to status revealing actions.

Research highlights
► We bring into the picture a new motive for remitting money, i.e. status seeking.
► We apply a variant of the signaling model, where migrants’ income is private information.
► To improve their status, migrants may send back home large amounts of remittances.
► This leads unsuccessful migrants to accept a worsening of their living conditions.
► Interesting policy implications follow (linked to the multiple equilibria outcome).