Remittances to Sub-Saharan Africa (SSA) have increased steadily in recent decades and are estimated to have reached about $32 billion in 2013. Though studies have shown that remittances can affect aggregate financial development in SSA — as measured by the share of deposits or M2 to GDP (Gupta et al. 2009), to my knowledge there is no evidence for this region on the impact of remittances on household financial inclusion defined as the use of financial services. This question is important because there is growing evidence that financial inclusion can have significant beneficial effects for households and individuals. In particular, the literature has found that providing individuals access to savings instruments increases savings, female empowerment, productive investment, and consumption. Furthermore, the topic of financial inclusion has gained importance among international bodies. In May 2013, the UN High-Level Panel presented the recommendations for post-2015 UN Development Goals, which included universal access to financial services as a critical enabler for job creation and equitable growth. In September 2013, the G20 reaffirmed its commitment to financial inclusion as part of its development agenda.
In post conflict countries, those who have made it out of the country are keenly aware that the livelihoods of those left behind vitally depend on remittance transfers. While concerns have been expressed about the possibility that remittances may stoke conflict, the majority view is that Diaspora support from abroad can contribute to democracy. It has been clearly established that private remittances are of central importance for restoring stability by enhancing human security in strife-torn societies. As in much of Sub-Saharan Africa, due to the predominantly informal nature of remittance delivery mechanisms, the magnitude of remittances to the economies of these regions has been under-estimated.
Robots have been a part of our mythology for thousands of years, the emphasis alternating between their positive transformative power over human society and acting as agents of great destruction. Our image of robots has been shaped to a large extent by Hollywood and literature. Celluloid robots in Star Wars, 2001 Space Odyssey, Robocop, Star Trek and many of Isaac Asimov’s novels have become a part of the human story. Off-celluloid, robots have been helping our society in concrete ways (for example police work (bomb disposal), infrastructure projects etc.). However when Watson won Jeopardy it brought artificial intelligence and robotics a new kind of attention. People started to wonder if robots could replace humans. When we think of robots we think of self driven cars, household robots or even warrior robots. However, in our view, the influence of robots and Artificial Intelligence (AI) is more subtle and their presence more ubiquitous than one would think. One such impacted sector is the agriculture sector (in the US) which is on the cusp of a massive transformation, as it moves from mechanization to automation. When rolled out and commercialized (soon) this massive scale of automation will have a significant impact on US farming and on immigration for sure. But does this also impact the development landscape? If so how?
Agricultural robotic systems have been implemented in fruit and vegetable harvesting, greenhouses and nurseries. Harvest Automation, for example, has developed the the HV-100, a 90-pound robot for commercial nurseries that can pick up and rearrange potted plants. There are quite a few silicon valley startups that are contributing to this revolution in the region known as “America’s Salad Bowl”, around Salinas Valley. California, where Salinas Valley is located, produced $1.6 billion dollars worth of lettuce in 2010 and 70%+ of all lettuce grown in America. Lettuce Bot, a new robot developed by Stanford engineers Jorge Peraud and Lee Redden, both from farming families from Peru and Nebraska, can “produce more lettuce plants than doing it any other way” (Yahoo Finance). Lettuce Bot’s innovation is that while attached to a tractor, it takes pictures of passing plants and compares these to a database. When the weed or a lettuce head that is too close to another one is identified, a concentrated dose of fertiliser is sprayed. A close shot of fertilizer kills the errant weed or lettuce head but actually feeds the further off crops at the same time.
Recent evidence suggests that remittances have a positive impact on economic growth. This post will examine evidence based on an international panel data set that captures the surge in migration and remittances observed during 2006-09. The dataset includes 70 countries spanning from 1990 to 2009. This to our knowledge is the most recent data set that has been used in empirical remittance work. The recent effort of countries to decrease money laundering, use of improved technology and decrease in transaction costs is leading to a decrease in the unofficial portion of remittances. There has also been a surge in migration and remittances in the last half of the past decade. Thus this dataset should more comprehensively capture the growth impact of remittances compared to previous studies. Different models used to calculate the impact of remittances on growth are detailed in the report titled Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth—Opportunities and Challenges, Volume II, Main Report, published in June 2012.
The impact of remittances on per capita GDP growth is economically significant
What impact do remittances have on stimulating overall economic growth? Remittances can be used for consumption and investment which further stimulates demand for goods and services, as well as contribute to financial development. On the other hand, they can create dependence in recipients and cause real exchange-rate appreciation which adversely affects domestic production.
The answer is an empirical one which we can answer using available data. Our findings echo recent economic research which shows that remittances, even when not invested directly, can have an important multiplier effect.
In our study, we focused only on the magnitude of the impact of remittances on aggregate demand in Bangladesh and calculated the traditional Keynesian multiplier effect, that is how much income is generated from every remittance dollar, following the approach adopted by Nicholas Glytsos by estimating a consumption function, an investment function, and an imports function. To estimate the parameters we used data from the Bangladesh Bureau of Statistics national accounts covering the period 1981-2010. We ran simple Ordinary Least Squares regressions to estimate the structural parameters. Here is a summary of our results:
Why do migrants send money back home? Distinguishing the different motives helps us understand the role these transfers play in influencing the behavior of households, and the policy implications of alternative motives can be very different.
I tried answering this question using micro survey data from Bangladesh on possible motivations, using a multivariate regression model.
The results were a little unexpected. Overall, the evidence contradicts the argument that remittance-receiving countries have little scope for policy intervention. The analysis shows that remittances are not driven exclusively by the need for family support but also by the migrants’ skill and education level and motivation to transfer their savings as investment in their home country. Thus, contrary to conventional wisdom, remittances play a vital role in not only supporting consumption but also in serving as an important source of investment funding. The extent to which remittances contribute to investment depends on the supportiveness of government policies and whether the economic environment is conducive to investment activity.
Surprisingly, none of the demand side variables—the existence of a surviving parent or spouse—seem to matter. Among the supply side variables, education and skill matter most.
The DEC-PREM Migration and Remittances Unit of the World Bank
Invites you to a
"Management of International Migration in India"
Presenter: Professor Irudaya Rajan
Center for Development Studies, Thiruvananthapuram, India
Chair: Dilip Ratha
Lead Economist and Manager, DEC-PREM Migration and Remittances Unit
April 20, 2011 12:30 – 2:00pm
Room MC 7- 100
The International Organization for Migration (IOM) presented their Final Report on The Bangladesh Household Remittance Survey 2009 in a workshop held in Dhaka on May 12, 2010. This survey collected data from a nationally representative sample of 10,926 migrant households. The findings of the survey confirm most of what we know about migration and remittance based on smaller surveys and anecdotal evidence. In particular, the findings are in line with the ones from the World Bank Survey (2007), which was smaller in scope.
I summarize below what appears to me as some emerging stylized facts about the profile of Bangladeshi migrants and their remittance behavior.
Migrants tend to be young (32 years old on average) married males who have at least completed primary education (over 75 percent). They go to the Middle-East (nearly 73 percent) and Asia (22) with the help of relatives (55 percent) and intermediaries (45 percent) after obtaining a low skilled or semi skilled job contract (79 percent) for which they had to wait for about 6 months.
While the beneficial impacts of migration and remittances on social welfare have been well documented, we know very little about the effects of migration--mostly by men-- on the local labor market behavior of women. To help address this gap, Mariapia Mendola (of the University of Milan) and I explored the gender aspects of migration and economic development in Albania over the past fifteen years. We decided to examine Albania during this period in greater detail because economic hardship during transition fostered massive migrant outflows, mostly to neighboring Greece and Italy. Also, male migration is an ordinary and widespread phenomenon in Albania.
Using unusually detailed international migration histories from the 2005 Albania Living Standards Measurement Survey, we found that Albanian households with family members (mostly sons and daughters) living abroad are less likely to have women in paid employment. However, male spouses with past migration experience exert a positive influence on female self-employment. The same effect is not seen for men when women migrate. Our findings suggest that over time, male-dominated, shorter-term migration may increase the income-earning opportunities for women at home.
Our working paper based on this research was published last month in the World Bank's Policy Research Working Paper series.
A constant struggle facing researchers and policymakers tackling migration issues is a lack of good data. The Center for Global Development recently released “Five Steps Toward Better Migration Data,” an excellent report on concrete steps governments and non-governmental organizations can take in the short run to fill this gap.
This report is particularly important in the context of a new round of census taking in 2010. The five recommendations are to:
- Ask basic census questions and make the data publicly available;
- Compile and release existing administrative data;
- Centralize labor force surveys;
- Provide access to microdata, not just tabulations; and
- Include migration modules on more existing household surveys.
Given the abundance of recommendations in the development industry, a laudable effort is the accompanying report card (PDF) which tracks countries’ progress with respect to the recommendations.