Does Remittances Finance Welfare Development?: Evidence from the South Pacific Island Nation of Fiji

Remittances to developing nations have become an important source of income to finance the recipient households’ livelihoods, where changes in expenditure patterns, consumption and savings-investment nexus for long term development lead to improve in wellbeing. The Pacific Islands have also seen to a significant rise in remittances and it has become a steady source of foreign exchange earnings. The island nations have a sizeable migration flow to Australia, New Zealand, the United States and United Kingdom as well as to other Pacific islands. A large number of emigrants from Fiji also migrate to Canada. More recently, remittances form a substantial flow through temporary labour schemes. Fiji’s rising migrant stock has seen remittances as the second largest foreign exchange earner after tourism surpassing other foreign capital flows of foreign aid, foreign direct investment as well as earnings from major commodity exports. It has large off-shore labour markets through specific employment abroad for teachers, nurses, care takers, sports personnel, military personnel and security officers in Australia, New Zealand, Dubai, United Kingdom, Middle East and the United Nations peace keeping force in the conflict-laden countries. The link between remittances and expenditure patterns has become an important nexus in the global welfare development framework. By increasing income of the recipient households’, remittances have gained impetus in the development agenda for its contribution to individual welfare through a range of consumption goods, entrepreneurial small and medium scale business and poverty reduction. Remittances impact on households’ welfare shows that this financial inflow has been used for consumer durable and non-durable goods, food, housing, savings, investment and developing human capital, i.e., schooling and health outcomes. Its eventual developmental impact depends on the sustainability and what categories of consumption and innovative investment expenditures the households spend remittances on. This study examines the impact of remittances on welfare development in Fiji using the household income and expenditure survey 2002-03 dataset for 5,245 households. Expenditure patterns of the households are estimated for various categories and further disaggregated by ethnicity, i.e. Fijian and Indo-Fijian households. The results provide some implications for social financing for wellbeing and note the empowering and visionary opportunities of remittances to be part of development.