Utilizing a novel data set on remittance data for India that matches household surveys to administrative bank data, we investigate the differences in self-reported and actual deposits toNon-Resident Indian (NRI) accounts. There is a striking difference between the perceived and actual frequency, as well as the amount of deposits, to NRI accounts. Our results indicate the presence of non-classical measurement error in the reporting of remittances in the form of deposits to NRI accounts. As a consequence, regression analyses using remittances as an explanatory variable may contain large upward biases instead of the usual attenuation of results under classical measurement error. Instrumental variables estimates are no better; the estimated coefficients from these regressions are more than three times the size of the OLS regression results.
The results point to the need to more carefully check the accuracy of the international remittance flows. The wide discrepancies in the Indian case could be both because of inaccuracies in the household survey as well as misclassification of the Balance of Payment data with some fraction of reported remittances being disguised capital flows (and hence likely to be less stable) rather than current account flows for family maintenance.