Topic 1

Overviews of Migration and Remittances

The earnings that migrants send home to their families, particularly international migrants, have grown in recent years to levels that exceed official development assistance and direct foreign investments.  The World Bank (2005) estimated that international remittances rose from $85.6 billion in 2000 to $167 billion in 2004 as compared to $79 billion of development assistance and $166 billion of direct foreign investment.  Currently the bank estimates that international remittances reached $318 billion in 2007, some $240 billion of which went to developing countries (http://siteresources.worldbank.org/EXTDECPROSPECTS/Resources/476882-1157133580628/BriefingNote3.pdf).  While potentially of similar significance, the amounts of internal remittances, sent largely by urban migrants back to rural communities of origin, as cash or kind, are not regularly recorded and are difficult to estimate.  More migrants move internally than internationally, but their earnings tend to be lower.  Despite problems of measurement, the obviously large amounts of remittances sent by international and internal migrants have attracted many researchers to examine their impact on various aspects of development.

As research about remittances has burgeoned, particularly on international remittances, a number of researchers have prepared synthetic summaries of the issues investigated and the findings.  The three overview articles offered here provide distinctive theoretical, analytic, and policy perspectives in introducing the research and debates about the different topics covered in this anthology and in showing how these topics are interrelated with one another in relation to development.

Hein de Haas helpfully reviews how past theories of development (developmentalist, neoclassical, historical structural, dependency) have led researchers to relatively optimistic and pessimistic expectations regarding the contributions of migration to development.  Adopting a pluralistic theoretical approach, which combines the new economics of labor and livelihood approaches, he then undertakes an assessment of the impact of remittances on development focusing his analysis on micro and macro levels of analysis and within different temporal scales.  Conceiving of remittance sending as a livelihood strategy by which migrants spread risk and create insurance, he evaluates contemporary research for evidence that doing so improves well-being, reduces poverty, and stimulates economic growth.  The article provides a valuable theoretical orientation and analytical approach toward a wide range of specific topics and questions taken up in this anthology.

Bimal Ghosh’s review of Migrants’ Remittances and Development: Myths, Rhetoric, and Realities (2006) provides an overview of the research and debates about a range of topics also covered in this anthology including: measurements and directions of remittance flows; the motivations, mechanisms, costs, and policies that affect the size and increase in remittance flows; the economic impacts of remittances at the level of households, communities, and nations; the limits to which policy makers can depend on remittances to promote development; and the positive roles that migrant organizations, diasporas, and financial institutions can take to increase positive development outcomes.   Based on his review of the research evidence, Ghosh concludes that remittances are unlikely to realize their developmental potentials without a coherent and cooperative policy framework between migrant sending and receiving countries.

Jeffrey Cohen describes the scope and contributions of macro-level studies that focus on the national impacts of remittances, including  such issues of balance of payments, capital flows, trade, taxes, and Gross Domestic Product, and micro-level studies that focus on remittances’ impacts on individuals, families, and communities.  Weighing the positive and negative findings of both approaches the author suggests that outcomes are not “unidimensional” and often neither one or the other.   He goes on to suggests ways to improve future research that not only connects the two levels of analysis but also takes into account geographic relations between rural and urban areas receiving remittances, long-term changes over the life cycles of migrant families, and migrants’ transnational ties as they mature both within and between generations.  The article’s framing of the issues draws upon a view of development that includes not only economic, but also cultural, social, and political roles of migrants.

The World Bank’s Global Economic Prospects 2006 examines existing research knowledge about “The Economic Implications of Remittances and Migration” from a market and policy perspective.  Placing the growth and impact of remittances within the wider context of current prospects for the global economy, the report emphasizes the policy challenges that migrant sending countries face in enhancing the impact of remittances on poverty and inequality and on consumption, savings, and investment.  Particular attention is given to policies that can reduce migrants’ costs in sending remittances – particularly transmission fees – as a means of maximizing the amounts and beneficial impacts of remittances on their families and home country economies.

 

Topic 1 – Articles

de Haas, Hein. 2007. “Remittances, Migration and Social Development: A Conceptual Review of the Literature,” Social Policy and Development Programme Paper Number 34. Geneva: United Nations Research Institute for Social Development (October).

This paper reviews the empirical literature on the relationship between remittances and various dimensions of social development in the developing world within a broader conceptual framework of migrationand development theory. Migration and remittances are generally part of risk-spreading and co-insurance livelihood strategies pursued by households and families.  Migration and remittances also have the potential to improve well-being, stimulate economic growth and reduce poverty directly and indirectly, while their effects on inequality are much more ambiguous.  The significant empirical and theoretical advances that have been made over the past several decades highlight the fundamentally heterogeneous nature ofmigration-remittance-development interactions, as well as their contingency on spatial and temporal scales of analysis, which should forestall any blanket assertions on this issue. Notwithstanding their often considerable blessings for individuals, households and communities,migration and remittances are no panacea for solving more structural development problems. If states fail to implement general social and economic reform,migration and remittances are unlikely to contribute to nationwide sustainable development. Migrants and remittances can neither be blamed for a lack of development nor be expected to trigger takeoff development in generally unattractive investmentenvironments.  Therefore, policies aimed at increasing people’s welfare, creating functioning markets, improving social security and public services such as health and education are also likely to enhance the contribution thatmigration and remittances can make to social development.

Ghosh, Bimal. 2006. Migrants’ Remittances and Development: Myths, Rhetoric and Realities. Geneva and The Hague: International Organization on Migration and The Hague Process on Refugees and Migration.

Prepared at the request ofthe HagueProcess on Refugees and Migration and the International Organization for Migration, this study highlights the ways in which the development potential of remittances could be most effectively used, while avoiding the possible risks. In doing so, it seeks to help promote a more balanced approach to the issue of remittances and development, which, as indicated above, is now high on the global economic agenda.  In focusing attention on the nexus between remittances and development, the study uses a narrowly circumscribed frame of reference. Obviously, remittances cannot be separated frommigration; andmigrationno doubt entails both benefits and costs, which, it is widely recognized, are shared differently both between and within the sending and receiving countries.  Remittances are an integral part of the welter of these benefits and costs.  However, these latter and much wider issues ofmigrationare not taken up in this short study as they remain outside its scope. Also, even in examining the impact of remittances on development in this limited context, the study essentially deals with migrant-sending developing countries.

Chapter 1 discusses the level of remittances, both formal and informal, and their geographical distribution. It also discerns types and personal characteristics of migrants as remitters.  Chapter 2 examines the various ways in which formal remittances to developing countries can be increased, covering such questions as migrants’ remittance behavior, cost of transfer, effectiveness of incentives and regulatory measures, and the importance of political and macro-economicenvironments. Chapter 3 describes the economic and social impacts of remittances, and this is followed by a more critical and relatively detailed appraisal of the development potential of remittances as well as of the possible pitfalls involved.  Chapter 4 provides a critical appraisal of relying on remittances for development including an appraisal of their stability, contribution to growth, inflationary pressures, poverty and inequality, and the weakening of family ties.  Chapter 5 examines the role of three major non-state actors, namely migrants’ associations, the diasporas and the corporate sector.  Chapter 6 sums up the report’s major findings.

Cohen, Jeffrey H. 2005.   “Remittance Outcomes and Migration: Theoretical Contests, Real Opportunities,” in Studies in Comparative International Development, 40 (1): 88-112 (Publisher Link)

This paper usefully summarizes the contributions of research that addresses the developmental impacts of remittances on both macro (national and structural) and micro (individual, familial, communal) levels and weighs the pros and cons of analytic perspectives and research findings that emphasize negative (dependency) and positive (maintenance and/or growth) outcomes for social and economic development.  Significantly the article examines remittances and development broadly to take into account not only their economic aspects but also the political, social, and cultural roles of migrants.  The author convincingly suggests that understandings of potential mix of both positive and negative outcomes of remittances as a part of migration processes more broadly can be improved by taking in to account the geographical location and linkages of rural and urban locations receiving remittances, long-term trends within both communities as migration becomes more prevalent and families as they go through life cycles, and the robustness or decline in transnational connections with and between generations.

World Bank. 2006. Economic Implications of Remittances and Migration. Washington, DC: Global Economic Prospect.

The report has two goals. The first is to explore the gains and losses from international migration from the perspective of developing countries, with special attention to the money that migrants send home. The second goal is to consider policy initiatives that could improve the developmental impact of migration, again with particular attention to remittances.  The report focuses on policies to improve the developmental impact of remittances.  It documents the high level of transactions costs facing migrants sending small remittances to their families, and it outlines the regulatory issues and market imperfections that keep costs high.  Fewer barriers to remittance flows and greater competition among remittance service providers could substantially reduce costs and boost remittance flows to developing countries.  The report shows how sound domestic policies and an investment- friendly climate can significantly increase the contribution of remittances and migration to improved living conditions back home.Our focus (for economic purposes) is on international migration from developing countries to high-income countries. Despite their importance, internal migration, migration among developing countries, and the political and social impacts of migration are beyond the scope of this work.

Chapter 1 reviews recent developments in and prospects for the global economy and their implications for developing countries. Chapter 2 uses a model-based simulation to evaluate the potential global welfare gains and distributional impact from a hypothetical increase of 3 percent in high-income countries’ labor force caused by migration from developing countries.  Chapter 3 surveys the economic literature on the benefits and costs of migration for migrants and their countries of origin, focusing on economically motivated migration from developing to high-income countries. The chapter then turns to remittances, the main theme of the report.  Chapter 4 investigates the size of remittance flows to developing countries, the use of formal and informal channels, the role of government policies in improving the development impact of remittances, and, for certain countries, their macroeconomic impact.  Chapter 5 addresses the impact of remittances at the household level, in particular their role in reducing poverty, smoothing consumption, providing working capital for small-scale enterprises, and increasing household expenditures in areas considered to have a high social value.  Chapter 6 investigates policy measures that could lower the cost of remittance transactions for poor households and measures to strengthen the financial infrastructure supporting remittances.