This paper uses a nationally-representative household survey carried out in Senegal to examine how remittance transfer channels affects the marginal spending behavior of households. Two finding emerge. First, controlling for selection and endogeneity, house-holds receiving remittances through informal transfer channels spend more at margin on key consumption good compared to what they would have spent on this good in receiving remittance through formal channels. Second, formal remittances channels lead to significantly increase marginal spending on two investments goods education and productive goods. At margin, households receiving remittances through informal transfer channels spend less on education and productive goods compared to what they would have spent on this good in receiving remittances through formal channels. These findings hold when we partition the data by quintile group based on household expenditure. Our findings support to the growing literature view that remittances can actually have a positive impact on economic development by increasing the level of investment in human capital and productive assets.
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