Workers’ Remittances and Domestic Investment in South Asia: A Comparative Econometric Inquiry

This study explores the effect of workers’ remittances on domestic investment in four selected South Asian countries: Bangladesh, India, Pakistan, and Sri Lanka, using contemporary time series estimation techniques from 1980 to 2017. The estimated results of the ARDL bounds approach to cointegration analysis have revealed that among selected South Asian countries, Pakistan has witnessed a significant negative effect in the long run. Similarly, the findings of other forms of capital flows also revealed varying effects across the countries considered. This study urges the transformation of aggregate economic behaviour from consumption to the production side, by adopting policies that would encourage domestic saving and investment activities. In this regard, among others, reduction in the interest rate and the interest rate spread would be beneficial. It urges the identification of factors that conditions varying effect of workers’ remittances and other capital inflows to mitigate negative effects into positive.     

Emigration dynamics: the Indian context

This report on emigration dynamics in India opens by providing background on short- and long-distance migration to and from India in response to such events as the formation of Pakistan as well as to the policies of the British Empire and Commonwealth. Section 2 discusses India's demographic and sociocultural setting in terms of population growth, urbanization, patterns of internal migration, growth of the labor force, economic growth, poverty alleviation, health, and education. The third section describes the lack of data on international migration. Some data are available on emigrants, but the only information on return migration is that gleaned from surveys in Kerala. Section 4 considers emigration to industrialized countries and notes that it is almost exclusively permanent and largely composed of individuals with professional, technical, or managerial skills. The resulting brain drain is described as is the incidence of illegal migration. India does not create conditions from which citizens must seek asylum, rather the country has absorbed flows of refugees from Pakistan, Tibet, Bangladesh, Afghanistan, and Sri Lanka. Available data on the characteristics of emigrants and return migrants are reviewed in the next two sections, and section 7 looks at the data on financial flows gathered from macro-level estimates of remittances. Section 8 is devoted to the community, family, and individual factors which influence emigration including the networks that facilitate migration and means of meeting migration costs. The ninth section summarizes the political setting with an emphasis on the adverse reaction of Nepal to population movement from India. The final section of the report projects future population movements. It is noted that if there were no restrictions on migration, millions of Indians would emigrate to the Americas, Africa, and Australia. Whereas poverty, unemployment, and population growth will likely erode living conditions in India, the government has no policy to encourage emigration. Labor migration to the Gulf countries will likely continue.     

The Migration–Development Nexus: Sri Lanka Case Study

This paper explores the relationship between migration and development in Sri Lanka, a country that has been the source of large numbers of migrants and the recipient of much development assistance. Commissioned as part of a wider study conducted by the Centre for Development Research, Denmark, this case study seeks to answer a set of specific questions about the nature and extent of links between development assistance and migration flows. The paper surveys the socio–economic context in which both migration and development have taken place in Sri Lanka, describing the causes, scale, and features of migration flows from Sri Lanka in recent decades. Two main streams of migration flows are identified: labour migration and political migration. The flows are distinguished by ethnic characteristics (the former is mostly Sinhalese and the latter pre–dominantly Tamil) and destination (the former to the Middle East and the latter to the West). Both flows have intensified during a time of protracted conflict and in the context of waraffected economic development since the early 1980s.
The importance of remittances from migrants to the Sri Lankan economy and the extent to which diaspora activities impact Sri Lanka are also discussed. Despite the lack of statistics, especially on informal remittances from the Tamil diaspora, it is suggested that the remittances have been and will continue to be a sizeable component of foreign exchange receipts in Sri Lanka. The paper concludes that the complex interactions between migration, development assistance, remittances, and conflict are important for the prospects for peace and reconstruction in Sri Lanka. The challenge in Sri Lanka will be to move from a vicious cycle of conflict, underdevelopment and migration to a more virtuous one. In this process, it is suggested that the diaspora will be a key player in the shift towards peace and remittances will be an integral part of reconstruction.     

Improving the contribution of migrant remittances to development: the experience of Asian labour-exporting countries

"The purpose of this paper is to review policy initiatives [concerning migrant remittances] in six major labour-exporting countries in Asia--Bangladesh, India, Korea, the Philippines, Pakistan, Sri Lanka, and Thailand. Where relevant, the experience of these countries will be compared and contrasted with those of labour-exporting countries in other parts of the world....[The author concludes that] the imposition of mandatory remittance requirements on migrant workers is unlikely to enhance remittance inflows unless the government of the labour-exporting country effectively controls the migration process." (SUMMARY IN FRE AND SPA)     

Emigration dynamics from and within South Asia

This review of current knowledge about emigration dynamics from and within South Asia (Bangladesh, India, Pakistan, and Sri Lanka) opens with a brief history of the three phases of emigration from the area since the 1830s (plantation labor; postindependence to the UK, US, Canada, and Australia; and labor migration to the oil-exporting countries). The influence of the creation of Pakistan and Bangladesh is also covered as are British colonial and commonwealth policies. It is noted that migration data are incomplete and that India exhibits an ambivalence about collecting such information. The discussion then turns to emigration since 1970 and considers permanent migration from South Asia to the traditional receivers; South Asian asylum seekers in Europe; South Asian refugees, illegal migrants, migrant workers (flows and destinations), the stock of contract migrant workers (and their characteristics); returnee migrant workers; and skill levels. Analysis is provided of macro level determinants of emigrations such as gross national product (level and growth), the general demographic and social situation, labor force growth and structure, poverty and inequality, and internal and international migration. Environmental factors causing displacement in Southern Asia include floods, cyclones, river bank erosion, drought, and desertification. Global warming could displace millions of people in the region, and development projects have contributed to displacement. The remainder of the report covers political and ethnic factors, micro-factors influencing migration decision-making, the policies of sending and receiving countries, the consequences of emigration, and the potential for migration in the future.     

Growth Effects of Remittances in Bangladesh: Is there a U‐shaped Relationship?

This article shows that the effect of remittances on economic growth involves a U‐shaped pattern, which is negative initially but later becomes positive. The analysis differs significantly from earlier studies in that it examines important methodological issues on the specification and estimation of the long‐run growth effects of remittances by estimating their impact on total factor productivity (TFP) rather than on the growth rate of GDP, using time series data from Bangladesh. The use of single‐equation cointegration methods shows that remittances’ effect on long‐run growth in Bangladesh is negative and falling until the remittances‐to‐GDP ratio is roughly eight per cent. The benefits of remittances receipts outweigh their costs and their net effects start to become positive when the ratio exceeds 14 per cent.     

An overview of present and future emigration dynamics in South Asia

The author presents preliminary findings on selected aspects of the dynamics which govern emigration from and within the South Asian region comprised of Bangladesh, India, Pakistan, and Sri Lanka. The paper attempts to identify some of the major reasons for observed migration flows and how the future may be envisaged especially in view of government programs, policies, and priorities. Contract labor migration is given special attention since it has become the predominant type of migration in the region. Sections consider a possible conceptual framework; measuring emigration pressure or potential; data and data problems; the volume of emigration since 1970; South Asian migrant workers; macro-level determinants of emigration; community, family, and individual factors; and sending country policies. The consequences of emigration are discussed in terms of the impacts upon the labor force and non-economic consequences. Observations for the future conclude the paper. Analysis of the dynamics of emigration from South Asia indicate an urgent need to improve data on various forms of emigration, that relevant officials in countries of origin have a longstanding concern about the exploitation of workers in sending as well as receiving countries, and the need to better understand the linkages between various factors relevant to the emigration process. An understanding of such linkages would allow for more realistic policies and planning for future emigration.     

Do asylum seekers and refugees choose destination countries? Evidence from large‐scale surveys in Australia,Afghanistan, Bangladesh,Pakistan and Sri Lanka

Some literature depicts refugees as more passive than active when selecting a destination country. We draw on surveys of over 35,000 people in Afghanistan, Bangladesh, Pakistan, Sri Lanka and Australia, to show that most potential asylum seekers and refugees of Hazara, Rohingya, Muslim and Tamil backgrounds prefer some destination countries over others and that many refugees from these groups surveyed in Australia specifically had Australia in mind as a destination country. We show how Australia's asylum seeker policy was a key reason why many refugees chose Australia in 2011 and 2012 and that subsequent restrictive asylum seeker policy changes appear to be reflected in potential asylum seeker considerations in 2014. We find that despite the restrictive asylum seeker policy changes, perceptions of Australia as a highly functioning civil society, relative to other potential destination countries, may explain why Australia remains a country of choice for asylum seekers from west and south Asia.     

What Drives Remittances from Saudi Arabia to Pakistan? Home Versus Host Country's Economic Conditions

Saudi Arabia is the largest source country of remittances to Pakistan since the 1970s. This study examined the impact of home versus host country’s economic conditions on remittances from Saudi Arabia to Pakistan. The ARDL bounds testing is used on the annual data set from 1973 to 2014. The study concluded that economic growth in the host country and economic crises in the home country increase remittances. 1% decrease in domestic output increases remittances by 2.79% while 1% increase in sending country’s output growth increases remittances by 5.2% in the long‐run. The bilateral trade has a positive while financial deepening has a negative impact on inflows. The impact of oil shock is insignificant. We suggest cautious foreign policy as remittances depend significantly on the host country’s economic condition that is not directly under the control of the home country but remittances can be sustained with bilateral trade.     

Best Practice Options: Albania

The Cooperative Efforts to Manage Emigration (CEME) site visit to Italy and Albania – organized in cooperation with the Centro Studi di Politica Internazionale (CeSPI), an Italian independent research institute – took place in June 2002. Albania is a country of 3.1 million people with a GDP of $4.1 billion that switched in the early 1990s, after 45 years of communism, from economic autarky to a peculiar form of market economy, and experienced some of the world’s highest emigration rates in the 1990s. Some 600,000 to 700,000 Albanians, or almost one–fourth of Albanians, and half of Albanian professionals, emigrated. As a result, the labour force is only 38 per cent of the population, versus 50 per cent in most industrial countries (UNDP, 1996, 2000). The major destinations of Albanian migrants in the 1990s were Greece, which had 400,000 to 600,000 Albanians in 2002, and Italy, which had 144,000 legal residents and probably some tens of thousands illegals at the end of 2001. 1 The Albanian Government estimates that about half of the Albanians in Greece are legal residents. There are also about 100,000 Albanians in Switzerland, the UK, Germany, and other Western European countries.
Many Albanians have become legal residents of Greece and Italy as a result of regularization–legalization programmes. Albania is also a transit point for third country nationals attempting to reach the rest of Europe via Albania. Of particular interest to the CEME members were efforts by the Italian and Albanian governments to cooperate in managing the flows of Albanian and transit migrants. When the CEME visit was made, Albania was experiencing rapid, yet unbalanced economic growth as a result of $615 million in remittances from Albanians abroad (estimates: Bank of Albania annual report, 2001), and aid from the European Union (EU) and other sources. The spending of remittances and aid has fuelled a building boom, but there was no clear sense of how Albania would use the window of opportunity opened by remittances and aid to develop a viable economy. The optimistic scenario is that remittances and investments from Albanians abroad will produce an economic take off based on value–added food production and tourism in the “Switzerland of the Balkans”. The pessimistic scenario is that corruption and divided government will prevent the development of a successful economic strategy, and that low wages, high unemployment, and inadequate services such as health care and education will prompt the continued emigration of young and educated Albanians. Potential best practices include: joint Italian–Albanian marine patrols to discourage smuggling and trafficking in small “fast boats”; Italy granting Albania at least 6,000 work visas a year to publicize that there is a legal way to work in Italy, helping to discourage illegal migration; and bilateral and international assistance to enable Albania to develop laws and institutions to deal with foreigners transiting Albania, and foreigners requesting asylum in Albania. Albania does not, on the other hand, appear to be a best practice in managing the use of remittances to aid economic development. Although remittances play an important role in basic subsistence and construction of housing, there have been fewer efforts to encourage investment of these funds in infrastructure or productive activities. The banking system needs substantial reform to become a venue for transfer of remittances and source of credit for enterprise development. Albania would benefit from a more systematic examination of the lessons learned in other countries about the investment of remittances for economic development.     

Is Asia adopting flexicurity?

In the face of global competition, many countries are adopting a flexicurity approach to labour regulation, providing employers with greater flexibility to hire and retrench workers while helping workers transition to new jobs. This review of six Asian countries finds that China and the Republic of Korea have enacted such reforms; Singapore and Malaysia provide some ingredients of flexicurity, though no unemployment insurance; India and Sri Lanka have introduced few reforms and continue to rely on an older model of employer-based security. To support informal workers, the Governments of China, India and Sri Lanka use public works, self-employment programmes and skills training.     

Where do Remittances Go in Household Consumption? Empirical Evidence from Sri Lanka-Wide Micro-data

Private internal and international remittances are a major source of household money in Sri Lanka, yet their impact on household welfare has long been a research gap. Based on the Migration and Development Theory, this article examines how private remittances affect household expenditure behaviour, using nationally representative microdata and applying quasi-experimental methods. Private remittances have significantly increased household per-capita expenditure and initiated positive behavioural changes via increased allocations for basic needs, human and physical capital investment. Compared with internal remittances, the impact of international remittance shows a strong potential for reducing poverty incidence and improving people's well-being: households in richer/richest expenditure quartiles and urban households invest in education, which supports the country's long-standing record of education. Rural households demonstrate favourable changes in spending behaviour with receiving private remittances. From a public policy standpoint, government favours migration so that remittances are more likely to flow. A proper remittance-transfer mechanism to encourage smooth remittance is thus required.     

The Effect of Remittances on Economic Growth in Kyrgyzstan and Macedonia: Accounting for Financial Development

Kyrgyzstan and Macedonia have experienced a reasonable increase in remittances over the last twenty‐five years. Subsequently, the extent to which remittances can be instrumental for economic development of the two countries has gained serious attention in recent development dialogues. The aim of this study is to examine the impact of remittances versus financial development on the economic growth of the two counties, complementing the burgeoning interest and focus on remittances for policy. The short‐run and the long‐run effects and the causality dynamics of remittances and financial development, are explored. The results show a long‐run positive impact of remittances on the economic growth of these countries. The impact of financial development is negative, significant only for Kyrgyzstan and not statistically significant for Macedonia. The causality results show that remittances support economic growth for Kyrgyzstan, whereas economic growth appears to propel remittances for Macedonia.     

The new economics of labour migration and the role of remittances in the migration process

This analysis considers international migration remittances and their impact on development in migrant-sending areas. The new economics of labor migration (NELM) posit that remittances lessen production and market constraints faced by households in poor developing countries. The article states that remittances may be a positive factor in economic development, which should be nurtured by economic policies. The impact of remittances and migration on development varies across locales and is influenced by migrants' remittance behavior and by economic contexts. Criteria for measuring development gains may include assessments of income growth, inequity, and poverty alleviation. It is hard to gauge the level of remittances, especially when remittances may not flow through formal banking systems. The International Monetary Fund distinguishes between worker remittances sent home for over 1 year; employee compensation including the value of in-kind benefits for under 1 year; and the net worth of migrants who move between countries. This sum amounted to under $2 billion in 1970 and $70 billion in 1995. The cumulative sum of remittances, employee compensation, and transfers was almost $1 trillion, of which almost 66% was worker remittances, 25% was employee compensation, and almost 10% was transfers during 1980-95. Total world remittances surpass overseas development assistance. Remittances are unequally distributed across and between countries. Migration research does not adequately reveal the range and complexity of impacts. Push factors can limit options for use of remittances to stimulate development.     

Emigration dynamics in South Asia,IOM / UNFPA workshop, 2-3 September 1996, IOM headquarters,Geneva, Switzerland

This paper describes the six research monographs that were presented at the Emigration Dynamic Workshops in South Asia in September 1996. Research reports were presented by Associate Professor Nasra Shah on an overview of emigration dynamics, Dr. Godfrey Gunatilleke on the role of networks and community structures in migration from Sri Lanka, Dr. Raisul Awal Mahmood on illegal migration from Bangladesh to Singapore, Kuala Lumpur, Bangkok, and Delhi due to desperate poverty, Dr. Farooq-i-Azam on high and low labor-sending migration districts in Pakistan, Dr. Mahendra K. Premi on the impact of internal Indian migration on international migration, and Dr. P.R. Gopinathan Nair on emigration from Kerala, India, to the Middle East. Representatives of South Asian governments discussed the implications of the research findings. Pakistan's representative urged cooperation and joint strategies among labor-sending countries. He cautioned that income and remittance estimates were unstable and unrealistic for inclusion in economic development plans. The Indian representative noted that, although Indian emigration is low, it is highly visible in the press. He agreed with the suggestion for greater cooperation between sending countries. The Bangladesh representative stated that the country needed to locate new markets for Bangladeshi emigrants, to guarantee the rights of emigrant workers, and to prevent trafficking in illegal migrant workers. Three major topics were discussed in the workshop session on the implementation of programs based on research findings. Workshop participants recommended updated information on migration trends, updated information on labor markets in receiving countries, formal and regular policy dialogue between sending countries, and promotion of continuing research by the International Organization on Migration.     

Remittances,Institutions and Growth in Africa

Remittances have become an important source of external finance in many developing countries. This article examines the relationship between remittances, institutions and economic growth in a panel of 26 African countries over the period 1980–2014. We apply the fixed effects (FE) and the two‐step system generalized method‐of‐moments (GMM) estimation methods. Our results show that there is a positive relationship between remittances and growth. We also find that institutions are an important determinant of economic growth. The interaction terms have a positive and statistically significant effect on economic growth. Thus, the growth effect of remittances is enhanced in the presence of strong institutions. Strong institutions are therefore germane in attracting greater remittance inflows to African countries. A clearer understanding of the channels through which remittance flows will enhance growth in African economies may assist policymakers to craft appropriate policies. In particular, a policy environment that promotes strong institutions would serve to attract more remittances.     

Empowered Wives and Frustrated Husbands: Nursing,Gender and Migrant Nepali in the UK

Since 2000, increasing numbers of Nepali nurses have crossed national borders to participate in the global healthcare market. The most common destination countries are the UK, US, Australia and New Zealand. In particular, educated middle‐class women are attracted to nursing with the full support of their families. There have been profound changes in women's position in Nepali society. As a female only profession in Nepal, nursing provides an excellent focus on how and why these changes have occurred. Based on a multi‐sited ethnography, including in‐depth interviews with nurses and their families, conducted in Nepal and the UK from 2006–2008, this article discusses the changing nursing profession within the broader context of gender dynamics. Between 2000 and 2008, around 1000 Nepali nurses migrated to the UK. International nurse migration hugely affects nurses' immediate family dynamics. This article illustrates how migrant nurses' husbands have to accept a compromised social position, from being family bread‐winners in Nepal to dependent husbands in the UK .

Policy Implications

• Since the late 1990s, a new women‐migration phenomenon has emerged in Nepal. The Nepal government's current women migration policy has created a serious controversy, which requires urgent policy attention.
• Because of British work permit regulations, Nepali nurses migrate to the UK on their own. Typically the UK government gives little consideration to how its international nurse recruitment practices and work permit policy affects migrants' family life. There is a need for a family‐friendly immigration policy.
• Female / nurse migration has a profound impact on nurses' families' lives in the UK. This area requires further enquiry.

     

Managing Migration: The Role of Economic Instruments

This paper reviews economic policies and instruments available to the developed countries to reduce unwanted migration from developing countries, not all of which is irregular migration. Countries generally welcome legal immigrants and visitors, try to make it unnecessary for people to become refugees and asylum seekers, and try to discourage, detect, and remove irregular foreigners. There are three major themes: 1. There are as many reasons for migration as there are migrants, and the distinction between migrants motivated by economic and non–economic considerations is often blurred. Perhaps the best analogy is to a river – what begins as one channel that can be managed with a dam can become a series of rivulets forming a delta, making migration far more difficult to manage. 2. The keys to reducing unwanted migration lie mostly in emigration countries, but trade and investment fostered by immigration countries can accelerate economic and job growth in both emigration and immigration countries, and make trading in goods a substitute for economically motivated migration. Trade and economic integration had the effect of slowing emigration from Europe to the Americas, between southern Europe and northern Europe, and in Asian Tiger countries such as South Korea and Malaysia. However, the process of moving toward freer trade and economic integration can also increase migration in the short term, producing a migration hump, and requiring cooperation between emigration and immigration destinations so that the threat of more migration does not slow economic integration and growth. 3. Aid, intervention, and remittances can help reduce unwanted migration, but experience shows that there are no assurances that such aid, intervention, and remittances would, in fact, lead migrants to stay at home. The better use of remittances to promote development, which at US$65 billion in 1999 exceeded the US$56 billion in official development assistance (ODA), is a promising area for cooperation between migrants and their areas of origin, as well as emigration and immigration countries. There are two ways that differences between countries can be narrowed: migration alone in a world without free trade, or migration and trade in an open economy. Migration will eventually diminish in both cases, but there is an important difference between reducing migration pressures in a closed or open world economy. In a closed economy, economic differences can narrow as wages fall in the immigration country, a sure recipe for an anti–immigrant backlash. By contrast, in an open economy, economic differences can be narrowed as wages rise faster in the emigration country. Areas for additional research and exploration of policy options include: (1) how to phase in freer trade, investment, and economic integration to minimize unwanted migration; (2) strategies to increase the job–creating impacts of remittances, perhaps by using aid to match remittances that are invested in job–creating ways.     

The economic,demographic, sociocultural and political setting for emigration from Sri Lanka

This study of emigration from Sri Lanka is introduced by a brief review of the situation during the colonial period and an overview of recent migration experience. The second section of the paper deals with data collection and sources for labor migration, political migration, and estimates of total net migration. The third section looks at economic and demographic trends in terms of the growth of the economy, population growth and social well-being, the growth of the labor force, unemployment, the structure of the work force, internal migration and access to agricultural lands, and income distribution and poverty. The sociocultural setting is then explored by considering exposure to the international environment, ethnicity and cultural affinity, the formation of information and job placement networks, the supportive role of the family, and the impact of success and failure. Moving on the influence of the political setting, the paper then discusses the government policy of foreign employment promotion as well as the influence of political developments on migration. In conclusion, the paper notes that future demand for domestic service workers will likely increase, and that Sri Lanka will continue to have a surplus of workers to fill this demand until the end of the 1990s, when a tightening domestic labor market and increased real wages will ease the push for migration. Political factors will continue to favor migration, however, unless a liberal democratic regime becomes the governing force in Sri Lanka.     

International Migrant Remittances and Labour Supply in Nigeria

The study analyses how remittances to Nigeria affect the labour supply of recipients using Propensity Score Matching (PSM) and a Log‐Linear regression model, with data from the 2013 Nigerian General Household Survey. The PSM results show that for the entire sample, the difference between the average amount of labour supplied per week by those that receive remittances and the amount they would have supplied without remittances is insignificant. The marginal impact analysis also shows that, ceteris paribus, the average labour supply for all recipients is inelastic to remittances. The results from the sub‐group analysis, however, show that receiving remittances negatively affects the labour supply of the self‐employed in agriculture, teenagers and the elderly. These results led us to the recommendation that policies to increase the inflow of remittances should be encouraged but in tandem with programmes to educate farmers on the benefit of investing remittances received in their farming business.