International remittances and household expenditure patterns in Tamil Nadu

International migration from Tamil Nadu has been increasing over the past two decades. The rise in international migration has contributed to increase in remittances inflows to the state. Using unit-level data from the National Sample Survey 64thround, this paper examines the factors that determine the inflow of international remittances, how remittances are utilised by the receiving households, and the extent to which households’ expenditure and investment patterns are affected by the remittance receipts. To ensure control over the problem of selection bias and to evaluate the impact of remittances on household expenditure patterns, this paper applies the propensity score matching method. The empirical results suggest that, compared to non-recipient households, households receiving remittances spend more on durable goods, healthcare and education. This finding supports the optimistic view that remittances help to increase the level of investment in human and physical capital in remittance-receiving countries. © 2016, Indian Society of Labour Economics.