This paper analyzes the impact of international remittances on household investment and poverty
using panel data (2000 and 2007) from the Indonesian Family Life Survey (IFLS). Using a
three-stage conditional logit model with instrumental variables to control for selection and
endogeneity, it finds that households receiving remittances in 2007 spend more at the margin on one
key consumption good (food) and more at the margin on one important investment good (education)
compared to what they would have spent on these goods without the receipt of remittances. Using a
bivariate probit model with random effects to control for selection and simultaneity, the paper also
finds that households receiving remittances are less likely to be poor compared to a situation in
which they did not receive remittances. These findings are important because they show that
households can use remittances to help build human capital and to reduce poverty in
remittance-receiving countries.