Migration, Remittances, and Economic Development

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Migration, Remittances, and Economic Development

  1. 1. Migration, Remittances, and Economic Development Dean Yang University of Michigan
  2. 2. 2 • Between 1965 and 2010, the fraction of people living outside their countries of birth increased from 2.2% to 3.1% of world population – Estimated 247 million migrants in 2013 • These migrants send home huge amounts of remittances, an international financial flow that compares favorably in magnitude with FDI and ODA – Estimated US$436 billion in 2014 MotivationThe basic numbers
  3. 3. 3 • Vast numbers of people in low-income countries want to emigrate, but cannot • Gallup World Poll: more than 40 percent of adults in the poorest quartile of countries “would like to move permanently to another country” if they had the opportunity • In 2010, U.S. Diversity Visa Lottery had 13.6 million applications for 50,000 visas, or 272 applicants per slot • Main motivation: dramatic increases in wages upon migration (Source: Clemens 2011, and citations therein) MotivationDemand for migration is high
  4. 4. 4 Notes: Ratios of U.S. to home-country wages for 35-year-old male urban worker with 9 years of education acquired in home country. Comparison is between individuals observed in U.S. data vs. home-country data. Source: Clemens, Montenegro, and Pritchett (2009). MotivationWage gains from international migration 15.5 14.9 11.9 7.5 6.3 5.2 3.8 3.5 2.8 2.7 2.5 2.2 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 RatioofU.S.tohome-countrywages Among top 10 sources of immigration to Sweden (Others include Iraq, Iran, Bosnia.)
  5. 5. 5 MotivationRemittances vs. other international financial flows Data show international financial flows to developing countries. Source: World Bank Development Prospects Group, “Migration and Development Brief 24,” April 13, 2015.
  6. 6. 6 MotivationTop remittance recipient countries Source: World Bank Development Prospects Group, “Migration and Development Brief 24,” April 13, 2015.
  7. 7. 7 • Remittances bring substantial benefits at the household level – Higher consumption, lower poverty – Increased investments in human capital, small enterprises • In addition, remittances serve as insurance, rising when origin areas experience negative economic shocks • Most evidence is correlational, but some natural experiments confirm impacts are causal MotivationRemittances and development Source: Yang (2011).
  8. 8. 8 Source: Yang (2008). MotivationA natural experiment among Filipino migrants 0.7 0.8 0.9 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 Jul96 Aug96 Sep96 Oct96 Nov96 Dec96 Jan97 Feb97 Mar97 Apr97 May97 Jun97 Jul97 Aug97 Sep97 Oct97 Nov97 Dec97 Jan98 Feb98 Mar98 Apr98 May98 Jun98 Jul98 Aug98 Sep98 Oct98 Month Malaysia Korea Taiwan Singapore Japan Start of Asian financial crisis (July 1997) Exchange Rates in Selected Locations of Overseas Filipinos (Jul 1996 - Oct 1998) US, Hong Kong, Saudi Arabia, Kuwait Start of Asian financial crisis (July 1997)
  9. 9. 15.0% 13.0% 3.5% 1.8% 11.6% 27.7% -16.7% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% Effectof25%improvementinmigrant'sexchangerate 9 Source: Yang (2008). MotivationImpact of positive migrant exchange rate shocks Positive exchange rate shocks for migrants led to higher remittances, and a variety of other substantial benefits for migrants’ origin households in the Philippines.
  10. 10. 10 • Decentralized nature of remittances poses challenges for policy – How to encourage individual migrants to send more? – How to channel remittances to particular ends without choking off the flow? • We still are still learning about policies that can: – Encourage migrants to send more remittances – Channel remittances towards uses with more long-term development impacts MotivationRemittance policies for development
  11. 11. 11 • Enhance migrant control over financial decisions at home – Savings experiments • Banco Agricola study • Matricula consular study in Texas – Eduremesa study with Viamericas – Edupay study with Bank of the Philippine Islands • Provide financial education – Educating migrant families in Indonesia – Motivating migrants in Qatar • Reduce remittance transaction fees MotivationEnhancing remittance impacts on development
  12. 12. 12 “I have many uncles and they get drunk, so I just send money when needed, or I send to someone like my sister who I trust.” Male, 34 years old, 8 months in the U.S., works as a roofer “The brother of my boss sent around $50,000 to his mother over the years. When he thought he had enough money to build a house, he asked his mom for the money. She said she didn't have it. She had lent it to an uncle. When he asked for the money back, the uncle threatened to kill him if he came back to El Salvador for the money.” Male, 30 years old, 1 year in the U.S., works as a carpenter MotivationDC-area Salvadorans on remittance uses
  13. 13. 13 • Migrants currently have limited ability to monitor or control how remittances are used by recipients • Migrants and recipients have different preferences as to how remittances should be used • In particular, compared to remittance recipients back home, migrants often have stronger preferences that remittances be saved rather than spent immediately • If migrants are given more control over remittance uses… – Remittance flows might be affected – And a higher fraction of remittances may be channeled to uses that have long-term development impacts MotivationEnhancing migrant control at home
  14. 14. Migrant vs. recipient remittance allocation (US$) Source: El Salvador Study of Migrant Families (ESSMF), Ashraf et al (2015)
  15. 15. 15 • We offered Salvadoran migrants in metro Washington, DC the ability to directly channel remittances into savings accounts in El Salvador (Ashraf et al, 2015) – Facilities developed for project in partnership with a Salvadoran bank, Banco Agricola • Implemented as a randomized controlled trial (RCT) – We randomly assigned migrants to a control group or to one of three treatment groups – Treatments involved offering different types of Banco Agricola bank accounts – Control group that was surveyed but did not receive the savings intervention MotivationSavings intervention among Salvadorans in DC
  16. 16. 19 MotivationImpact on savings at Banco Agricola $186 $231 $334 $482 $0 $100 $200 $300 $400 $500 $600 Control Treatment 1 Treatment 2 Treatment 3 SsvingsatBancoAgricola(US$) (Savings account for recipient only) (T1 + joint account for migrant and recipient) (T2 + account for migrant only) ** Note: Savings is average balance in total across all Banco Agricola accounts, over 12 months post-treatment.
  17. 17. 20 • No identifiable impact on savings when channeling remittances only to bank accounts for remittance recipients • Substantial positive impacts of offering suite of options that allow migrants monitoring and control over home country savings • Matricula consular study in Texas provides complementary findings (Chin et al, 2011) – Increased bank account opening and savings in U.S. – Migrants appear to value control over savings in the U.S. as well MotivationTakeaways from Banco Agricola study
  18. 18. 21 • Funding for education – Eduremesa study with Viamericas (Ambler et al, 2015) • Migrants direct remittances to education when offered matching funds, but not otherwise • Positive impacts on student outcomes in El Salvador – Edupay study with Bank of the Philippine Islands (De Arcangelis et al 2015) • Filipino migrants send more remittances when “labeled” for education • Not much additional impact of directing funds to schools • Control over grocery expenditures (Torero and Viceisza 2013) – No apparent demand for control in this domain MotivationControl over other uses of remittances
  19. 19. 22 • Enhance migrant control over financial decisions at home – Savings experiments • Banco Agricola study • Matricula consular study in Texas – Eduremesa study with Viamericas – Edupay study with Bank of the Philippine Islands • Provide financial education – Educating migrant families in Indonesia – Motivating migrants in Qatar • Reduce remittance transaction fees MotivationFinancial innovations for transnational households
  20. 20. 23 • Financial literacy training for migrants before departure, and their families (Doi et al. 2014) – Indonesian female migrants, departing to work as maids – Training both the migrant and family led to increases in savings in the origin household – No similar impact of training migrant only or family only – Key takeaway: complementarity from training both migrants and family members • Motivational session for married male migrants in Qatar from Kerala, India (Seshan and Yang 2014) – Treatment was a one-time motivational session on personal finance – Among migrants with lower savings at baseline (prior to treatment) treatment led to higher total (Qatar plus India) household savings and higher remittances sent by migrants to wives MotivationFinancial training for transnational households
  21. 21. 24 MotivationImpact on migrant savings, remittances Savings Remittances 52,593 35,742 0 10,000 20,000 30,000 40,000 50,000 60,000 Low savings subsample Indianrupees(INR) Treatment Control 155,333 139,309 130,000 135,000 140,000 145,000 150,000 155,000 160,000 Low savings subsample Indianrupees(INR) Treatment Control Source: Seshan and Yang (2014)
  22. 22. 25 • Enhance migrant control over financial decisions at home – Savings experiments • Banco Agricola study • Matricula consular study in Texas – Eduremesa study with Viamericas – Edupay study with Bank of the Philippine Islands • Provide financial education – Educating migrant families in Indonesia – Motivating migrants in Qatar • Reduce remittance transaction fees MotivationFinancial innovations for transnational households
  23. 23. 26 • asdf MotivationExperiment with money transmitter Viamericas • On-the-spot survey of remitters • Randomized discount on Viamericas transactions to “primary remittance recipient” (PRR)
  24. 24. 27 • Two studies – With Banagricola among Salvadorans (Aycinena et al 2010) • Provided discounts in increments of $1 to $5 (off base of $9), valid for 12 months – With Viamericas among Salvadorans and Guatemalans (Ambler et al 2014) • Provided discount of $3 (off base of $8), valid for 10 weeks • Both studies find large, positive impacts on transactions and total dollars remitted MotivationStudies on impact of fee reductions
  25. 25. 0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1 Control Treatment 28 MotivationRemittance transactions to PRR Time periods are 2-week intervals to reduce noise. Graph shows total number of remittances sent during the 2-week interval. • No evidence that remitters reduce their remittances later Discount period
  26. 26. 29 Time periods are 2-week intervals to reduce noise. Remittances are total $ sent during the 2-week interval. MotivationRemittances in $ to PRR Discount period $0 $50 $100 $150 $200 $250 $300 Totalremittances($) Discount Control • Clear positive impact on $ remittances to PRR
  27. 27. 30 • Recent experimental findings point the way towards promising policies to promote financial inclusion of migrants and their families – Bank account offers to migrants raise savings – in host and origin countries – but only when migrants have control over accounts – Migrants also seek to direct remittances to education – Financial education can increase transnational household savings – Price discounts stimulate remittances, at least in the short run MotivationIn sum
  28. 28. 31 • What is impact of simply labeling remittances for specific purposes, such as education? • Would migrants guarantee microloans for borrowers in the home country? • Can we facilitate remittances-as-insurance? – Provide discounts on remittance fees when natural disasters occur in home country? MotivationOpen questions
  29. 29. 32 Ambler, Kate, Diego Aycinena, and Dean Yang (2015), “Channeling Remittances to Education: A Field Experiment among Migrants from El Salvador,” American Economic Journal: Applied Economics, Vol. 7, No. 2, April, pp. 207-232. Ambler, Kate, Diego Aycinena, and Dean Yang (2014), “Remittance Responses to Temporary Discounts: A Field Experiment among Migrants from Central America,” NBER Working Paper 20522, September. Ashraf, Nava, Diego Aycinena, Claudia Martinez A., and Dean Yang (2015), “Savings in Transnational Households: A Field Experiment among Migrants from El Salvador,” Review of Economics and Statistics, Vol. 97, No. 2, May, pp. 332-351. Aycinena, Diego, Claudia Martinez A., and Dean Yang (2010), “The Impact of Transaction Fees on Migrant Remittances: Evidence from a Field Experiment among Migrants from El Salvador,” working paper. Chin, Aimee, Leonie Karkoviata, and Nathaniel Wilcox (2011) “Impact of Bank Accounts on Migrant Savings and Remittances: Evidence from a Field Experiment,” working paper. Clemens, Michael, Claudio Montenegro, and Lant Pritchett (2009), “The Place Premium: Wage Differences for Identical Workers across the U.S. Border,” Center for Global Development Working Paper 148. Clemens, Michael (2011), “Economics and Emigration: Trillion Dollar Bills on the Sidewalk?” Journal of Economic Perspectives, Vol. 25, No. 3, Summer, pp. 83-106. De Arcangelis, Giuseppe, Majlinda Joxhe, David McKenzie, Erwin Tiongson, and Dean Yang (2015), “Directing Remittances to Education with Soft and Hard Commitments: Evidence from a Lab-in-the-field Experiment and New Product Take-up among Filipino Migrants in Rome,” Journal of Economic Behavior and Organization, Vol. 111, March, pp. 197-208. Doi, Yoko, David McKenzie and Bilal Zia (2014), “Who You Train Matters: Identifying Complementary Effects of Financial Education on Migrant Households,” Journal of Development Economics, 109, pp. 39-55. Seshan, Ganesh and Dean Yang (2014), “Motivating Migrants: A Field Experiment on Financial Decision-Making in Transnational Households,” Journal of Development Economics, 108: 119-127. Torero, Maximo and Angelino Viceisza (2013), “To remit, or not to remit: that is the question. A remittance field experiment,” working paper. World Bank, “Migration and Development Brief 24,” Development Prospects Group, April 13, 2015. Yang, Dean (2008), “International Migration, Remittances, and Household Investment: Evidence from Philippine Migrants’ Exchange Rate Shocks,” Economic Journal, Vol. 118, April, pp. 591-630. Yang, Dean (2011), “Migrant Remittances,” Journal of Economic Perspectives, Vol. 25, No. 3, pp. 129-152. MotivationReferences

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