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Remittance

Get the Conditions Right for Remittances to Matter

Zahid Hussain's picture

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

How Remittances Grease the Wheels of Bangladesh’s Economy

Zahid Hussain's picture

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:

What Drives Remittances of Bangladeshi Migrants?

Zahid Hussain's picture

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.

Migration and Development Seminar: Management of International Migration in India

Sanket Mohapatra's picture

 
The DEC-PREM Migration and Remittances Unit of the World Bank
Invites you to a

BBL
 "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

New evidence reaffirms that migration is costly but still worthwhile for Bangladeshis

Zahid Hussain's picture

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.

International migration by men affects labor market participation by women at home

Gero Carletto's picture

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.

Finding ways to improve migration data

Ani Silwal's picture

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: 

  1. Ask basic census questions and make the data publicly available; 
  2. Compile and release existing administrative data;
  3. Centralize labor force surveys; 
  4. Provide access to microdata, not just tabulations; and 
  5. 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.

Event Announcement: The Impact of the Economic Crisis on Migration and Remittances, June 1, 2009

Neil Ruiz's picture

The Migration and Remittances Team of the Development Economics Prospects Group (DECPG) of the World Bank is organizing a brown bag lunch seminar on "The Impact of the Economic Crisis on Migration and Remittances" on Monday, June 1, 2009 from 12:00pm-1:30pm, at the Main Complex of the World Bank, 1818 H Street NW, Room MC5-100.  Two eminent scholars, Bimal Ghosh (Colombian School of Public Administration)  and Manuel Orozco (Inter-American Dialogue) will present their views on how the economic crisis is effecting migration and  remittances world-wide.  The event will be chaired by Dilip Ratha, Lead Economist, DECPG. 

This event is open to the public.  If you would like to attend the brown bag lunch seminar, please RSVP by emailing Claudia Carter at: ccarter@worldbank.org. 

 

Mobile money comes to Bangladesh

Sanket Mohapatra's picture

Bangladesh seems on track to launch a mobile money transfer (MMT) service which could potentially reduce costs to 1 percent of the transfer amount. The project will be implemented by Grameen Phone (a subsidiary of Grameen Bank which has pioneered mobile access to rural areas in Bangladesh) and is being supported by the World Bank, according to India's Economic Times. 

There are two new innovations compared to other developing countries with successful MMT implementation: (1) This service is targeted primarily for cross-border transfers (estimated at $9 billion annually), unlike other countries such as Kenya and Philippines where MMT has been focused on domestic transfers, and (2) It will use a network of ATM machines, where recipients can withdraw the money instead of having to go to a designated agent.

Entering the cross-border market will require developing settlement systems between Grameen Phone and banks and money transfer operators in the major remittance-sources (including in the Gulf) and extensive cooperation between the respective central banks and banking supervisors. The success of this venture will serve as a useful pilot for other countries that are considering such cross-border transfers.

A commendable web anthology on remittances

Dilip Ratha's picture

I recently revisited the Social Science Research Council's (SSRC) Web Anthology on Remittances and Development, and was pleasantly surprised to find an excellent collection of research articles on this rather fast-growing topic. The articles are presented in a convenient format, organized under some broad themes such as concepts, methods, measures, determinants, uses, and impacts of remittances.

One area where more articles exist and can be added are those on remittance systems (by this I mean retail payment systems) and how they can be leveraged for accessing finance/capital at the household or institutional level. There could also be more articles on regulations - especially on anti-money-laundering/countering financing of terrorism - that affect remittance transactions.

Data for the people: A migration and development almanac from the Philippines

Dilip Ratha's picture

Earlier this year, the Institute for Migration and Development Issues (IMDI) in the Philippines launched a free (with registration) online country-level databank on overseas migration and development called the Philippine Migration
and Development Statistical Almanac.

United States allows travel and remittances back home by Cuban immigrants

Sanket Mohapatra's picture

The Miami Herald reported today that the Obama administration has lifted restrictions on family visits and sending of remittances by Cuban immigrants living in the United States (more details from a White House fact sheet).  Although there are no official figures on the amount of remittances sent by the 1 million Cuban immigrants in the U.S., according to a State Department background note on Cuba, these flows are estimated to be between $600 million and $1 billion annually.  The earlier U.S. policy, in effect since 2004, allowed very small amounts of remittances to immediate family members and trips back home every three years.   

Interestingly, the Cuban government still levies a tax of some 20 percent on inward remittances, and a White House spokesman and some senators have called on Cuba to reduce these onerous charges. These charges represent a significant loss of value for the recipients and a barrier to sending remittances through official channels.

New monthly remittances data and live online discussion transcript now available

Dilip Ratha's picture

Yesterday's online discussion went very well; many excellent questions were asked, but I only had time to answer a select few.  I hope to answer the rest of the questions soon.  The transcript is now available online.

Also, we have shared an Excel file with monthly remittance flow data for the following countries on our team website: 

Remittances expected to fall by 5 to 8 percent in 2009

Dilip Ratha's picture

With Sanket

We have revised our forecasts for remittance flows to developing countries in the light of a downward revision to the World Bank’s global economic outlook (see our latest Migration and Development Brief 9). We now expect a sharper decline of 5 to 8 percent in 2009 (see figure 1 and table 1 below) compared to our earlier projections.

This decline in nominal dollar terms is small relative to the projected fall in private capital flows or official aid to developing countries. However, considering that officially recorded remittances registered double-digit annual growth in the past few years to reach an estimated $305 billion in 2008, an outright fall in the level of remittance flows as projected now will cause hardships in many poor countries.

South-South remittances from Russia, South Africa, Malaysia and India are especially vulnerable to the rolling economic crisis. Also the outlook remains uncertain for remittance flows from the Gulf Cooperation Council (GCC) countries. Both low-income and middle-income countries are expected to see a similar decline – about 5 percent – in remittance inflows in 2009. Although newspapers are reporting a large number of migrants returning home, new migration flows are still positive, implying that the stock of existing migrants continues to increase. The persistence of the migrant stock will contribute to the persistence (or resilience) of remittance flows in the face of the crisis. Box 1 below outlines the reasons for expecting remittances to remain resilient during the crisis.


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