Long Absence Does Not Necessarily Kill Love

It is said short absence quickens love, long absence kills it.  This is not always true in reality. One case is remittance behavior of long-term migrants. The remittance literature argues that the amount of remittances sent by migrants to their countries of origin declines through time. Reunification of families or breakdown of family ties underpins such behavior. However, the empirical evidence is not all supportive. The passage of time does not significantly influence migrant remittance behavior. Remittances are maintained at high levels over long periods. This allays concern that economies dependent on remittances will face foreign exchange shortages and falling living standards as remittance levels fall because of reduced migration rates and decline in migrants' willingness to remit over time.

What is the Bangladesh experience?  One way to judge is to look at the remittance behavior of Bangladesh diaspora abroad. There is no reliable data on the number and location of Bangladeshi diaspora members. A recent ILO report–Reinforcing Ties: Enhancing contributions from Bangladeshi diaspora members--estimates the number of Bangladeshi migrants living permanently in the United States and Europe at around 1.2 million.

There is a perception that diaspora members remit significantly less compared to temporary migrant workers. The ILO report does a simple calculation. The major destinations for Bangladeshi diaspora members are the United Kingdom and the United States. Based on key informants, the report assumes in these two destinations there are approximately one million Bangladeshi diaspora members. This constitutes about 12 percent of all Bangladeshi migrant workers who migrated since 1976. Remittance data from FY03 to FY12 reveal that 21.5 percent of total remittance to Bangladesh came only from these two countries. In FY14, 22.7 percent of total remittance came from the United States and the United Kingdom. This demonstrates the Bangladeshi diaspora members do not stop remitting just because they have migrated permanently. These diaspora members do send remittance in a proportion significantly larger than their share in all migrant Bangladeshis abroad. 

Results from estimations of remittance functions for Bangladeshi migrants, reported in the World Bank’s (WB) Bangladesh: Towards Accelerated, Inclusive and Sustainable Growth—Opportunities and Challenges--taking account of all possible motivational characteristics in a multivariate regression model, are similar. There is no evidence supporting remittance decay . If remittance decay were present, the migrant’s length of stay variable (Time) will need to have a significant negative coefficient allowing also for nonlinear relationships. The results show that the coefficient on Time is positive and highly significant while the coefficient on Time-square is negative and significant. This suggests that the level of remittance increases at a decreasing rate with the migrants’ length of stay, controlling for other variables. There is therefore no evidence in the Bangladesh Household Income and Expenditure Survey 2010 dataset that the remittance function of migrants is downward sloping.

What drives these remittances?  If remittances do not decline with the length of stay, why do they continue through time, as empirical research seem to suggest? Enduring love for those left behind is one, but not the only, answer.  Alternative explanations rely on network theory, the concepts of social capital and social ties. The idea is remittances are not simply unrequited transfers but exchange of resources accessible through the maintenance of relationships with other network members. Migrants are motivated by factors in addition to altruistic family support, including asset accumulation and investment back home. While asking what motivates migrants to remit, it is important to be mindful of factors that influence the continued existence of migrant/non-migrant relationships in which remittances are exchanged, not gifted.

The WB report cited above finds fairly strong and robust evidence that motivations other than altruism are important determinants of remittance behavior. Remittances are motivated by continued maintenance of land assets at home or perhaps the aspiration to inherit the land. More powerful evidence is the positive and highly significant coefficient on the pre-remittance income of the receiving households. This is completely unsupportive of the altruism hypothesis and quite consistent, though not the only possibility, under the self-interest hypothesis. Despite holding grievances about business climate in Bangladesh, Bangladeshi diaspora members remit to invest in productive sectors. Returning diaspora members have made significant investments in sectors such as construction, technology, and banking.
 
However, as we all know, love is not an easy game to play.  It can be expressed in forms other than simple monetary transfers.  The ILO report points out several such manifestations of caring:
 

• Bangladeshi diaspora members tend to support short/fixed term contract Bangladeshi migrant workers on an individual basis. There are instances when the undocumented Bangladeshi migrant workers have received support from the Bangladeshi diaspora organizations or businesses.
   
• They provide financial support; temporary living space; arrangement of work under regular conditions; and information to those seeking legal support. In the United Kingdom, a large number of short/fixed-term contract Bangladeshi migrant workers are employed in many of the restaurants owned by Bangladeshi diaspora members.
   
• In addition, due to the strong kinship feeling among Bangladeshis, diaspora members who want to bring their relatives/friends extend the support needed to relatives and friends in Bangladesh. Such practices have decreased significantly in recent years due to the stricter immigration laws and policies in most destination countries.

The remittance literature appears to be converging towards the conclusion that none of the assumptions about migrants’ remittance behavior, on which the remittance decay scenario is based, is valid. There is much less cause for pessimism on the sustainability of remittance levels. While demand-side variables affecting the need for family support may be significant, remittances are also driven by supply- side factors, such as the migrants’ income level, motivations to transfer their saving and invest in their countries of origin. Most significantly, once all other variables are controlled for, the passage of time itself does not have a significant effect on migrants’ remittance behavior. In other words, if there is no change in the size or composition of the migrant community, there is no reason to believe that the aggregate level of remittances will fall, provided net migration does not become negative.