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Submitted by Rajan Panta on

Hi David
It is an interesting article which argues that why remittance data might be overestimated. However, there are several reasons as to why remittances figures might be underestimated rather than overestimated. First, as mentioned in the paper, still a substantial proportion of remittances are transferred through informal channels such as hundi, hawala, chit funds due to various reasons such as hosting countries’ macroeconomic environment and government policies and regulations such as currency controls and overvalued currencies, high tariffs and taxes and slow and expensive licensing process for the financial institutions. For example, in the context of Nepal, the living standard measurement has shown that only about 1 percent of remittances inflow from India comes through formal channel! Second, due to the high cost, slow transfer service and lack of access to financial services render the informal money transfer more attractive to migrants (Buencamino and Gorbunov, 2002).
Second the data on the stock of migrants and hence the growth of migrants is scant and not reliable. For example, in a recent report on improving the database on migrants, it states: “Our patchy statistics on international migration amount to an enormous blind spot (Tomas et al. 2009, Preface, p. v). The report further states that “the data on international migration that countries now collect and publish are so limited, however, that we know much less about how much and what kind of migration is happening in today’s world than we know about international trade and investment flows (p.1)”. Since the data on migration is politically sensitive and not many countries report the true values, we can speculate the true figures would be much higher than the scant official data. In that context, the growth of migration (gL*) in equation (5), (p. 12) would be much smaller and the consequent estimate of the remittances would be much lower.
Third, in contrast to settlement migration, contract migration and seasonal migration have been a feature of many developing countries. The seasonal or short term workers, who stay less than one year in the destination countries, by definition, would not be counted as ‘residents’ of the destination countries according to the IMF’s Balance of Payments manual (IMF 1993; Rienke 2007). The contract migration has been a feature specially for the workers working in the Gulf countries from primarily South Asian countries. Thus, the true remittances would fall short of the official figures.
Fourth, as argued in the paper there are discrepancies in the micro data estimated from the household surveys and the macro data in the balance of payments statistics. However, household surveys are only representative surveys and people tend to under report their true income (Shonkwiler et al. 2014). Moreover, since the balance of payments statistics is based on double entry book keeping system, a large and persistent errors and omissions might provide useful check into the accuracy of the remittances data (though errors and omissions can come from different sources and sometimes mutually offsetting).