yang-2011-migrant-remittances

Overview of International Financial Flows to Developing Countries

  • International financial flows to developing countries often discussed include:

    • Direct Foreign Investment (FDI)

    • Portfolio Investment

    • Official Development Assistance (ODA)

  • Remittances:

    • Since the late 1990s, remittances sent home by international migrants have surpassed ODA and portfolio investment, sometimes nearing FDI levels.

    • Remittances to developing countries in 2009: $325 billion, in 2010: $307 billion.

    • Growth rate (1999–2008): 12.9% annual growth in real terms.

Comparative Stability of Remittances

  • Remittances showed remarkable stability during economic downturns:

    • Dropped only 5.2% from 2008 to 2009 while FDI fell 39.7%.

Economic Implications of Remittances

  • Economists are interested in several key questions regarding remittances:

    • Development Effects:

      • Impact on recipient households and economies.

      • Do remittances promote investment or increase consumption?

    • Insurance Role:

      • Examining if remittances act countercyclically in migrant home areas.

    • Decision-Making Insights:

      • How remittance flows reflect household resource allocation in transnational contexts.

Observations on Migrant Decision-making

  • Remittances provide a clearer picture for analysis compared to other intrahousehold resource flows because:

    • Their monetary nature allows tracking through international financial intermediaries and household surveys.

    • Potential differences in preferences for income allocation between migrants and households in home countries.

Transaction Patterns in Remittances

  • Notable characteristics of remittances include:

    • Typically small amounts sent frequently.

    • Behavioral Aspects:

      • Why do remitters send lower amounts at higher frequencies?

      • Implications of self-control issues for both senders and recipients.

Institutional Responses to Remittances

  • Private Sector:

    • Growth of dedicated money transmission operators (e.g., Western Union, MoneyGram).

  • Public Sector Initiatives:

    • Countries like El Salvador, India, and the Philippines have begun structuring policies to make use of remittances for economic development.

Economic Studies and Data Research

  • Various studies help unpack the impact of remittances, including:

    • Impacts on investment in education and entrepreneurial activities in home countries.

    • Examination of how country-specific economic situations affect remittance flows.

    • Evaluations conducted through randomized controlled trials to reflect on remittance use and control by migrants.

Future Directions and Innovations

  • Expect continued innovation in the remittance market, influenced by:

    • Technological advancements such as mobile money transfer systems (e.g., M-PESA).

    • Ongoing research into effective policy and financial solutions that empower migrants and enhance the developmental role of remittances.

  • Importance placed on unbiased studies to assess the impact of migrant financial behaviours comprehensively.