Do International Remittances Contribute to the Subjective Well-Being of Rural Households in Indonesia?

The purpose of this study is to assess how international remittances shape the subjective well-being of rural households in Indonesia, with an emphasis on the paired indicators of happiness and life satisfaction. This study describes a new empirical approach based on the conditional mixed process (CMP) framework, enabling the simultaneous modelling of a household’s probability of receiving remittances and the resulting well-being outcomes, while explicitly correcting for endogeneity and selection bias. Using household-level survey data from 600 rural families in East Java, Central Java, and West Sumatra, the authors demonstrate that remittances raise subjective well-being. Remittance-receiving households report, on average, a 0.42-point higher happiness score and a 0.37-point higher life-satisfaction score on a five-point scale (≈ 10–12 % relative gains). As an example, we illustrate the proposed technique by estimating heterogeneous effects across income tertiles; the happiness premium is concentrated among low- and middle-income groups, whereas life satisfaction gains accrue across all income strata. Our method allows researchers and practitioners to improve impact-estimation accuracy by simultaneously modelling receipt and outcome equations, reducing bias in marginal effect estimates by up to 20 % compared with single-equation logit or OLS specifications. The effectiveness of the evaluation procedure is confirmed by robustness calculations, including alternative instrument sets and placebo tests, all of which determine the direction and significance of the core remittance effects. These research results develop the literature on the non-monetary consequences of migration transfers, supplement welfare economics studies of rural Indonesia, and can be used by policymakers to design targeted financial-inclusion programs, gender-sensitive social protection, and productive investment schemes that magnify welfare returns from remittances. This study is novel because it applies a CMP strategy to the study of subjective well-being in a developing-country context, jointly identifies the determinants and impacts of remittances within a unified econometric architecture, and provides fine-grained distributional evidence that previous single-equation studies could not reveal.