ADDIS ABABA UNIVERSITY SCHOOL OF GRADUATE STUDIES ECONOMIC AND SOCIAL IMPACTS OF REMITTANCE ON REMITTANCE RECEIVING HOUSEHOLDS: THE CASE OF DESSIE, WOLLO BY: WUBALEM WOREKET JUNE 2015 i ADDIS ABABA UNIVERSITY SCHOOL OF GRADUATE STUDIES Department of Geography and Environmental Studies Specialization: Population, Resource and Development ECONOMIC AND SOCIAL IMPACTS OF REMITTANCE ON REMITTANCE RECEIVING HOUSEHOLDS: THE CASE OF DESSIE; WOLLO A Thesis Submitted to the School of Graduate Studies, Addis Ababa University in Partial fulfillment of the Requirement of the Degree of Master of Population, Resource and Development BY: WUBALEM WOREKET JUNE 2015 ii ADDIS ABABA UNIVERSITY SCHOOL OF GRADUATE STUDIES Department of Geography and Environmental Studies Specialization: Population, Resource and Development ECONOMIC AND SOCIAL IMPACTS OF REMITTANCE ON REMITTANCE RECEIVING HOUSEHOLDS: THE CASE OF DESSIE; WOLLO Signature Advisor Tegegne G/Egziabhir (prof.) ………. Internal Examiner Yohannes G/Michael (PhD) …………. External Examiner ……………………………… …………… iii Table of Contents Contents Page List of Abbreviations ..................................................................................................................... ix Acknowledgment ........................................................................................................................... xi Abstract ......................................................................................................................................... xii CHAPTER ONE ............................................................................................................................. 1 1. INTRODUCTION .................................................................................................................... 1 1.1 Background of the Study ....................................................................................................... 1 1.2 Statement of the Problem ...................................................................................................... 4 1.3 Objectives of the Study ......................................................................................................... 5 1.3.1 General Objective ........................................................................................................... 5 1.3.2 Specific Objectives ......................................................................................................... 5 1.4 Research Questions ............................................................................................................... 5 1.5 Description of the Study Area and Research Methodology .................................................. 6 1.5.1 Description of the Study Area ........................................................................................ 6 1.5.2 Research Methodology ................................................................................................... 6 1.5.2.1 Study Design ........................................................................................................... 6 1.5.2.2 Data Sources and Types .......................................................................................... 7 1.5.2.3 Data Collection Instruments ................................................................................... 7 1.5.3 Sampling Techniques ..................................................................................................... 8 1.5.4 Methods of Data Analysis .............................................................................................. 9 1.6 Significance and Justification of the Study ........................................................................... 9 1.7 Scope of the Study................................................................................................................. 9 1.8 Limitation and Challenges of the Study ................................................................................ 9 1.9 Organization of the Paper .................................................................................................... 10 CHAPTER TWO .......................................................................................................................... 11 REVIEW OF RELATED LITERATURE .................................................................................... 11 iv 2. Understanding Migration and Migration Process ..................................................................... 11 2.1 Definition of Remittance ..................................................................................................... 12 2.2 Aid and Remittance: ............................................................................................................ 13 2.3 International Migration and Remittance Patterns in Ethiopia ............................................. 15 2.4 Why Do Migrants Remit ..................................................................................................... 18 2.5 Remittance Magnitude and Efforts to Encourage Remittance Flow ................................... 18 2.6 Instruments for the International Migration and Remittance Variables .............................. 19 2.7 Gender, Migration and Remittance ..................................................................................... 20 2.8 Migration, Remittances and Development: A Theoretical Overview ................................. 22 2.9. Factors Determining Use of Remittances........................................................................... 23 2.10 Economic and Social Impact of Remittance ..................................................................... 23 2.10.1 Economic Impacts of Remittance ............................................................................... 23 2.10.1. A, Remittances and Economic Growth ......................................................................... 23 2.10.1. B, Macro and Microeconomic Impacts of Remittance ................................................. 24 2.10.1. C Remittances, Poverty and Welfare ............................................................................ 27 2.10.1.D, Remittances and Investment ...................................................................................... 30 2.10.1. E, Investment Behavior of Remittance Receiving Households .................................... 32 2.10.1. F, The Insurance Effect of Remittances at the Microeconomic Level .......................... 32 2.10.1.G, Remittance and Capital Accumulation ...................................................................... 33 2.10.1. H, Remittances and Consumption ................................................................................. 33 2.10.1.I, Remittance and Inequality .......................................................................................... 34 2.10.1.J, International Migration, Remittances and Labor Market ........................................... 35 2.10.1. K, Remittance and Real Exchange Rate........................................................................ 35 2.10.2 Social Impacts of Remittance ..................................................................................... 37 2.10.2.1 Remittance and Human Capital Investment ....................................................... 37 2.10.2.2 Remittance and Education .................................................................................. 37 2.10.2.3 Remittance and Healthcare ................................................................................. 38 v 2.10.2.4 Remittances and Housing ................................................................................... 39 CHAPTER THREE ...................................................................................................................... 40 BACKGROUND OF THE STUDY AREA ................................................................................. 40 3.Background Information of The Town ...................................................................................... 40 3.1 Establishment and Naming.................................................................................................. 41 3.2 Geography of the Town....................................................................................................... 42 3.2.1 Location and Area ........................................................................................................ 42 3.4 Population of the Town ....................................................................................................... 44 3.5 Infrastructure of the Study Area .......................................................................................... 45 3.5.1 Education ...................................................................................................................... 45 3.5.2 Healthcare service ......................................................................................................... 46 3.5.3 Housing ......................................................................................................................... 46 3.5.4 Water Supply ................................................................................................................ 47 3.5.5 Road .............................................................................................................................. 47 3.5.6 Telecommunication Service ......................................................................................... 47 3.5.7 Electric Power Service.................................................................................................