Remittance inflow is now the largest source of external financing to developing countries, but little research has yet firmly established the effect of remittance on household welfare. We investigate the case of Tajikistan, one of the most heavily remittance-dependent countries in the world. We use a panel dataset collected nationwide and employ instrumental variable (IV) estimation to confirm a positive relationship between receiving remittance and household welfare after correcting endogeneity. Moreover, we find that the effect of remittance on household spending is more pronounced in households whose head is male, older, or less educated. Then, we combine our estimated coefficients with the projected decline of remittance inflow as a result of the COVID-19 outbreak and show the pandemic’s adverse effect on household spending per capita.
Key words: COVID-19, remittance, migration, Tajikistan, household welfare