This study estimates the impact of migrants' remittances on households' spending decisions in Ecuador. Applying both parametric and semiparametric techniques, we find strong evidence that remittances enhance expenditures on education, health, and housing, but decrease expenditures on food. This supports the hypotheses that these inflows result in a stronger human capital accumulation and therefore improve the long-run production possibilities. We do not find strong differences in the impact on expenditure patterns of male and female household heads. The sex of the remitter and the receiver affects the expenditure behavior only slightly. JEL Codes: C14, C34, D12, F24, J16

Constrained Firms, Not Subsistence Activities: Evidence on Capital Returns and Accumulation in Peruvian Microenterprises * We investigate the returns to capital and capital accumulation using panel data of Peruvian micro enterprises (MEs). Marginal returns to capital are found to be very high at low levels of capital, but rapidly decreasing at higher levels. The dynamic analyses of capital accumulation in MEs suggest that credit constraints explain a major part of the variation in firm growth. We find a very large positive effect of household non-business wealth on capital stocks of MEs. We also show a sizable effect of risk on accumulation and pronounced interactions between wealth and risk. The presented evidence is consistent with poorly endowed entrepreneurs who operate in imperfect capital markets and a very risky environment. JEL Classification:D13, D61, O12

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