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.