Worker Remittances and Capital Flows to Developing Countries

Worker remittances constitute an increasingly important channel for the transfer of resources to developing countries. Behind foreign direct investment, remittances are the second‐largest source of external funding for developing countries. Yet, literature on worker remittances has traditionally focused on the impact of remittances on income distribution within countries, on the determinants of remittances at a micro‐level, or on the effects of migration and remittances for specific countries or regions. Macroeconomic determinants and effects of remittances have received more attention only recently. Hence, the focus of this paper is on the macroeconomic determinants of remittances and on differences in these determinants between remittances and other capital flows. We find that remittances respond more to demographic variables while private capital flows respond more to macroeconomic conditions.     

Remittances in Ghana: Origin, Destination and Issues of Measurement

Few studies on remittances have focused on sub-Saharan Africa. This paper analyses a nationwide survey of 5,998 households to determine the characteristics of both internal and overseas remittances in Ghana. Particular attention is paid to the poverty-alleviation potential of remittances. Furthermore, this study uses a smaller scale pilot project with a matched sample of senders and receivers of remittances to identify some problems with using household-level surveys to assess the volume and impact of overseas remittances, and offers some suggestions as to how to handle these problems. The paper estimates that foreign remittances may be three times as large as Bank of Ghana estimates, bringing Ghana on par with large remittance receiving countries such as the Philippines and Mexico. The paper concludes that while foreign remittances are larger in value, locally sent remittances reach poorer segments of the population. Both foreign and local remittances are unevenly geographically distributed, being received more in the centre and southern regions than in northern Ghana where the poorest regions are. The paper argues a need to study multiplier effects of foreign remittances, as these can be large and eventually accrue to rural populations.     

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.     

Migration Plans and Received Remittances: Evidence from Fiji and Tonga1

This paper investigates the relationship between remittances and migration intentions in the source country using data from households in the Pacific island countries of Tonga and Fiji. Unlike previous research it accounts for potential endogeneity in the relationship between remittances and intentions and also includes households that receive remittances but do not have current migrants. We find a positive impact of remittances on intentions. The impact of remittances on intentions is stronger in a country with a longer history of migration and stronger in households with current migrants than those without migrants. These results provide new evidence on the role of remittances in the development of migration chains.     

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.     

Migrant remittances and development

Income remittances from migrant workers to countries of origin are central to the links between migration and development. Multiple, complex, and diverse forces, however, affect the flow of remittances. Factors may include the number and characteristics of workers abroad; levels and types of economic activity in sending and host countries; differential wage, exchange, and interest rates; political risk; and the facility for transferring funds. These factors then shape personal decisions made by migrants and their families regarding remittances, after which any longer-range development consequences of remittances may result. Debate rages over the effects of remittances on development. This paper therefore reviews papers on the measurement of remittances and gives recent findings on the volume and direction of flows. It continues by considering evidence on the uses of remittances and their consequences for development, and closes with a discussion of policy options for increasing and channeling remittance flows.     

Overseas workers' remittances in Asian development

In recent years, overseas workers from Asia have been sending remittances of about $8 billion annually to their home countries. These remittances are an important source of precious foreign exchange for the major labor-exporting countries. The overall development impact of remittances, however, has not been well established. Remittances are spent primarily on day-to-day consumption expenditures, housing, land purchase, and debt repayment. Although only a small proportion of remittances are directed into productive investments, this does not warrant the conclusion that the developmental value of remittances is negligible. In fact, remittances spent on domestic goods and services Asia provide an important stimulus to indigenous industries and to the economies of the labor supplying countries. It is these broader macroeconomic benefits of remittances which seem to have been largely ignored in the literature, and this perhaps explains the pessimistic view of the developmental value of remittances. Reservations concerning the effects of remittance on the sending countries include the fears that 1) expenditure patterns of remittance receiving households may create a demonstration effect whereby nonmigrant households may increase consumption, 2) remittance inflow will increase income and wealth inequalities, 3) remittance expenditures may result in inflation, 4) remittances may produce only short-term fluctuations in long-term economic development, and 5) remittances may adversely affect agricultural development.     

Do internal and international remittances matter to health,education and labor of children and adolescents? The case of Vietnam

Using data from Vietnam Household and Living Standard Surveys in 2006 and 2008, this study estimates the effect of the receipt of international remittances and internal remittances on education, labor and healthcare utilization of children and adolescents in Vietnam. It shows that there are no statistically significant effects of receipt of remittances on school enrolment as well as child labor of children and adolescents. However, receiving international remittances helps children increase the number of completed grades by around 2% of the average completed grade for children. Both international and internal remittances are positively associated with the number of outpatient health care visits.     

The role of international remittances in health outcomes in Ecuador: prevention and response to shocks

This article evaluates the impact of remittances on health outcomes in Ecuador using an instrumental-variables approach. Although we do not find significant impacts on long-term child health variables, we find that remittances do have an impact on health expenditures, and on some preventive issues such as de-worming and vaccination. In addition, we find significant effects of remittances on medicine expenditures when illness occurs. In this regard, remittances are used for both preventive and emergency situations. Interestingly, we also find a significant and positive effect of remittances on health knowledge.     

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.     

Migrant remittances in Greece and Portugal: distribution by country of provenance and the role of the banking presence

The article examines migrant remittances per country of origin of remittances for two emigration countries, Greece and Portugal. It also examines the relationship between remittances and the number of banks of the emigration country in the host country.
From the analysis it appears that remittances are concentrated in a small number of host countries – the US and Germany for the Greek case; France (mainly) and the US, Germany and Switzerland for the Portuguese case.
Remittances followed similar trends, characterized by especially high growth during the 1970s and also during the second half of the 1980s. For both countries similar trends are observed regarding the relationship between remittances and remittances per migrant with the presence of banks of the home country at the important countries of origin of remittances.
The growth of the banking presence in host countries had a significant impact on the growth of migrant remittances. However, remittances and migrant population are neither the unique nor main reason for banking expansion abroad. The common European financial and banking market is expected to play a major role in the banking presence abroad, particularly in European Union countries.     

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.     

International Migrants' Remittances and Welfare Status of the Left‐Behind Families in Turkey

In this study, micro implications of remittances are examined based on the data from the 1996 Turkish International Migration Survey (TIMS‐96), part of a comprehensive study of Eurostat and the Netherlands Interdisciplinary Demographic Institute (NIDI). Results of the study imply that migrant savings are generally used for satisfying basic consumption needs. Patterns of expenditures suggest that for 12 percent of all the households receiving remittances, about 80 percent used remittances to improve their standard of living. Considering the variation by regions, it is observed that households in less‐developed regions spent more on daily expenses than those in developed regions. This suggests that daily expenses of households in less developed regions depend significantly on remittances received by households. Moreover, remittances have a positive impact on household welfare; households receiving remittances are found to be better off than nonremitting households. This suggests that migration and remittances have positive indirect effects on incomes of emigrant households. A considerable part of the relevant literature argues that remittances are mostly spent on consumption, housing and land and are not used for productive investment that would contribute to long‐run development. This conclusion often rests on arbitrary definitions of “productive investments.” Access to better nutrition and allocation of more resources to education are, without question, forms of productive investment. Although emigration does not serve as a solution to the problems of national development, it is evident that remittances generate considerable welfare effects, at least for the remittance‐receiving population.     

International Migration and the Role of Remittances in Eastern Europe

In this paper we analyse the effect of remittances on employment performance for Central and East European (CEE) economies. We show that the impact of remittances on unemployment depends on its effect on productivity growth and investment. In order to empirically analyse the impact of remittances we estimate a productivity equation using a set of 11 transition countries during the 1990 to 1999 period. Our results show support for the view that remittances have a positive impact on productivity and employment both directly and indirectly through its effect on investment.     

New Light on the Remittances‐Poverty‐Health Nexus in Macedonia

Macedonia receives about 10 per cent of GDP as cash remittances per year while a third of the population faces poverty. The study aims to investigate whether remittances improve the poverty and health of individual remittance‐receivers in Macedonia. To that end, we rely on the 2008 Remittances’ Survey and a sequential structural model linking remittances to social indicators. We find that remittances have a significant effect oto consumption, in particular health consumption, hence contribute to reducing poverty. In turn, improved health consumption significantly reduces the incidence of bad health among receivers. This finding lends support to the claim that remittances serve an informal social protection in Macedonia.     

Migration, remittances and rural development: findings of a case study in the Indian Punjab

Rural household survey data in the Ludhiana district of the Indian Punjab was used to study the nature and role of remittances in rural development. Of the 1646 outmigrants from the area since 1961, the 949 women who migrated for marriage and children under 12 years old were excluded from the study. Nearly all husbands who outmigrated had sent remittances. Parents and grandparents were 2nd and 3rd most likely to remit, but their numbers were small. Education did not correlate with remittance. Distance and time since emigration did not affect remittance. The frequency and the size of remittances are discussed. Remittances to outmigrants were insignificant. The remittances from outmigrants seem to raise the incomes and the levels of living of rural households. The remittances serve the purpose of redistributing income from urban to rural areas. Remittances also widened the gap between rich and poor in the rural areas because the better-off groups were more likely to receive remittances than the poorer groups. Most of the money sent from outmigrants was spent on consumable goods, food and clothing. Only a small proportion was spent on productive investment. This was usually done by farming families who invested in land or farm necessities. It is concluded that remittances from outmigrants can have a positive effect on the rural economies. Investment opportunities for nonagricultural families must be provided.     

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.     

International Remittances and Private Schooling: Evidence from Kerala,India

This study investigates the impact of international remittances on private school enrolment in Kerala. Using data from the 2010 Kerala Migration Survey and employing an instrumental variable (IV‐Probit) approach to address the endogeneity of migration, we found that remittances have a positive and significant effect on private school enrolment. After disaggregating the sample into different heterogeneous groups, we found that remittances have greater effect on boys, children residing in rural areas, and those belonging to socially advantageous groups and from higher wealth quintile. Children from lower wealth quintile and belonging to socially disadvantageous groups are least affected by migration and remittances.     

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.     

Discursive representations and policy mobility: how migrant remittances became a ‘development tool’

In this article, I focus on two sets of practices that researchers and policy advocates carry out within international organizations and think tanks promoting what I term the remittances‐to‐development (R‐2‐D) agenda. Their work conjured up, elaborated and diffused a representation of remittances as a financial flow and made remittances visible as a promising source of development finance for the global South. First, there is the work of discursive representation in which the advocates of the R‐2‐D agenda collected, compiled and visually represented data to draw out the characteristics of remittances that would make them attractive to development policymakers. Second, there were the policy transfer efforts, in which the champions of the R‐2‐D agenda wielded various forms of soft power to convince national government officials to ‘improve’ remittances statistics by adopting new measurement techniques. These practices turned remittances into a neoliberal development tool.