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A blog about migration, remittances, and development

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This blog is hosted by Dilip Ratha, lead economist at the World Bank. Its goal is to leverage migration and remittances for development.  
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February 2009

China and Taiwan launch a two-way postal remittance service

Submitted by Sanket Mohapatra on Fri, 02/27/2009 - 17:49

China launched a two-way postal remittance service with Taiwan earlier this week. The Chinese daily Xinhua reports that this was the first formal money transfer from the mainland to Taiwan since 1949. 
 
While people in mainland China would be able to receive inward remittances in some 20,000 post offices, outward remittances would be available at over 2,000 post offices. The Taiwan post office has already offered such a service since December.
 
The cost to send money is 8 percent of the transfer amount for sending up to 200 Yuan from mainland China to Taiwan, and for the other way around, a fixed fee of 400 new Taiwan dollars (about $12) for a mail transfer.

Apart from being a historic moment for migrants on both sides of the Straits, this step shows how postal networks—which have perhaps the widest reach among the population, especially in rural areas—can play an important role in facilitating formal cross-border remittance flows.       

Moving away from home... and away from poverty?

Submitted by Kathleen Beegle on Tue, 02/24/2009 - 12:03

Finding routes out of poverty remains a key issue for households and policy makers alike. A long term vision of development in Africa and elsewhere suggests that poverty reduction is associated with intergenerational mobility out of rural areas and agriculture, and into urban non-agricultural settings. To respond to new economic opportunities, people must be geographically mobile. Constraints to their movement may in fact impede economic growth.

In a recent working paper, we studied the link between physical movement and economic growth, by re-surveying 4,400 people in 2004 from the Kagera region of Tanzania who were first surveyed in 1991. We found that the returns to within-country migration are very high: consumption growth among migrants was 36 percentage points higher than among those who remained in their baseline villages.

Is this growth gap because the migrants are somehow ‘different’, perhaps more productive, than those who stay? The evidence says no, it isn’t. Moreover, while moving out of agriculture and out of remote areas is a winning strategy, we found that migration leads to economic growth for those who don’t change sectors, and, surprisingly, even for those who move to more remote areas!  Just the act of moving – presumably in part a response to economic opportunities – is important.

So why don’t more people move if economic returns to geographic mobility are so high? A number of crucial social constraints might be at work. For example, younger people with weaker household ties, unmarried and male, have more freedom to take advantage of opportunities. What is acceptable or safe for a young man might be unacceptable and jeopardize marriage possibilities for a young woman. Heads of households or their spouses also find it harder to move.

Zimbabwe’s economic crisis: will adopting foreign currency help to increase remittance flows through formal channels?

Submitted by Sanket Mohapatra on Mon, 02/23/2009 - 15:29

Zimbabwe's government recently announced a partial dollarization, declaring the U.S dollar and other foreign currencies as legal tender alongside the Zimbabwean dollar in its efforts to fight a crippling hyper-inflation (after announcing the launch of a 100 trillion Zimbabwean dollar note in January). This measure could make remittance transfers more visible.  These have been often sent through unofficial channels so far, the result of a large parallel market premium since the official exchange rate has lagged behind the parallel market rate.

The UN news agency IRIN reports that the long queues that used to form outside exchange bureaus (often for exchanging foreign currencies that were hand-carried and sent by other means by migrants into the country) have now shifted to the banks where formal money transfers are processed.

The ongoing economic and political crisis in Zimbabwe has caused GDP to collapse by more than 50 percent, inflation to reach 231 million percent in July 2008, and the share of people living in poverty to increase to more than 80 percent of the population. Remittances to Zimbabwe from its 3 million emigrants (a quarter of the population) who fled the crisis are estimated to be between $360 million to $1 billion annually—the actual figure is likely to be even higher. These flows may have helped to stave off a complete collapse of the country and even more misery for the poor.  
 
Some questions to consider:

Reverse remittances? Yes, but not really.

Submitted by Dilip Ratha on Fri, 02/20/2009 - 11:43

With Sanket

A New York-based money transfer company recently reported that migrants from the Dominican Republic (as well as Colombia, Costa Rica, Ecuador and Russia) are transferring money from their home countries to the United States. The number of such transactions through La Nacional reportedly grew from 150 a month in 2006 to about 80-150 a day in 2008.  The reason behind these “reverse remittances,” according to this company, is that the economic crisis in the United States is reportedly forcing many migrants to dip into their savings and assets back home.

We have no way of judging the extent of such reverse remittances. Data on outward remittance flows are of questionable quality in most of the countries. Also many large migrant destination countries do not report high frequency data on inward remittance flows. A modest, and rather indirect, inference about reverse remittances can be drawn from a decline in foreign currency deposits - which are likely held by migrants or their relatives - in Dominican Republic and other countries. In the last 12 months, such deposits have declined by 7% in Dominican Republic, 12% in India, and 6% in Mexico (see Figure 1).

Figure 1: Non-resident deposits* declined in 2008

Non-resident deposites declined in 2008

* Dominican Republic - foreign currency deposits, India - foreign currency and repatriable rupee deposits, and Mexico - foreign currency demand deposits and time deposits from the public. Note that these charts use different scales.
Sources: Central banks of the respective countries

Remittance flows to developing countries are estimated to exceed $300 billion in 2008

Submitted by Dilip Ratha on Wed, 02/18/2009 - 09:56

With Sanket and K.M. Vijayalakshmi

Newly available monthly and annual data show that remittance flows to developing countries reached $305 billion in 2008 compared to a revised $281 billion in 2007 (see table 1 below, click here for the Excel spreadsheet). The revised estimates translate into a 23 percent growth in 2007, and a 9 percent increase in 2008. While there is a significant deceleration in the growth of remittances in 2008 compared to the previous year, both the levels and growth rates in 2007 and 2008 are higher than previously estimated (more in our Migration and Development Brief 8).

Note that this round of data release reflects more or less final data for 2007, but data for 2008 are still estimates that will be subject to another round of revision in late Spring or early summer.

We are currently revising our forecasts for 2009-10 in light of the latest data revision. We hope to issue a Migration and Development Brief summarizing our outlook shortly, for sure in the next couple of weeks.

Revised estimates

The countries with significant data revisions include the three largest recipients: India, China and Mexico.  Remittance flows to India are conservatively estimated to have reached $45 billion in 2008 (compared to earlier estimates of $30 billion). Remittance flows to China were about $35 billion in 2008, some $8 billion higher than previously estimated, and those to Mexico about $2 billion higher.

Will the global financial crisis affect the presence of China in Sub-Saharan Africa?

Submitted by Sonia Plaza on Wed, 02/11/2009 - 16:36

Chinese President Hu Jintao will visit Mali, Senegal, Tanzania and Mauritius this month to discuss a series of measures to help African countries cushion the impact of the global financial crisis.

Over the past decade, China has been consolidating its economic relationship with various African countries.  Given the crisis, I thnk it would be interesting to discuss if China will maintain its aid, trade, investment and migration flows to Sub-Saharan Africa and if there will be opportunities for new innovative financing mechanisms.

In her recent book, "Dead Aid," Dambisa Moyo mentioned that “if you start to look towards China for example, which has $4 trillion of reserves, all of a sudden you could see there might be another opportunity to do a bond issue in the Chinese market." 

Some recent developments on this front: 

Consumption smoothing via migration and remittances

Submitted by Dilip Ratha on Tue, 02/03/2009 - 10:17

Atlanta Fed Research Economist Federico Mandelman and Andrei Zlate, a PhD candidate in economics at Boston College, have prepared a paper analyzing the role that of migration and remittances during the business cycle. The data they present indicate that when the U.S. economy has outperformed Mexico’s, there were usually more attempted illegal crossings into the United States.

The flow of remittances to Mexico increases during boom times in the U.S. economy as well as during recessions in Mexico.  During economic expansions, immigrant labor becomes relatively scarce, as the increase in the number of immigrants does not keep up with the increase in labor demand. Thus immigrants receive relative higher wages and send larger remittances. The opposite occurs during recessions, when immigrant labor becomes relatively abundant and immigrant wages decline. Border enforcement discourages temporary return migration, as it makes more difficult to re-enter once the economic conditions improve in the recipient economy.

¿Se están reduciendo las ofertas laborales para los inmigrantes a raíz de la crisis financiera?

Submitted by Sonia Plaza on Mon, 02/02/2009 - 10:47

A medida que la crisis financiera en el mundo se agudiza algunos países empiezan a tomar medidas en el campo laboral para reducir el número de empleos ofertados a los inmigrantes.

España acaba de anunciar una reducción en el catalogo de ocupaciones de difícil cobertura en un 15% para el trimestre de 2009. El catalogo contiene las ocupaciones en las que los Servicios Públicos de Empleo de España han encontrado dificultad para gestionar las ofertas de empleo que los empleadores les presentan cuando quieren cubrir puestos de trabajo vacantes y entonces se las pueden ofertar a trabajadores extranjeros. (Ver  catalogo adjunto para las posiciones ofertadas para el primer trimestre del 2009)

De acuerdo a la nueva publicación ya no se demanda mas posiciones en albañilería, servicio domestico o posiciones para la agricultura,  siendo estos las categorías de empleos  en las que los inmigrantes ofertaban su trabajo. (Ver http://www.prensaescrita.com/diarios.php?codigo=S&pagina=http://www.elpais.com)

La preocupación que los inmigrantes ocupen las posiciones que son para los trabajadores del país se acentúa en tiempos de alto desempleo. Ese parece ser el punto de vista en Estados Unidos, país en el cual algunos representantes del Senado están presionando por una nueva legislación para que los empleadores contraten exclusivamente trabajadores americanos. (Ver http://www.nbcbayarea.com/news/business/NATL-Bailed-Out-Banks-Sought-Foreign-Workers.html)