Academic journal article Journal of Business Strategies

To Send, or Not to Send: That Is the Question. A Review of the Literature on Workers' Remittances

Academic journal article Journal of Business Strategies

To Send, or Not to Send: That Is the Question. A Review of the Literature on Workers' Remittances

Article excerpt

Abstract

This paper reviews the empirical literature on workers' remittances. Based on the empirical evidence, we are able to assess the facts and myths about the determinants and consequences of remittances. We also discuss the potential implications of our findings for the theoretical literature on remittances and account for the open-ended questions that still remain. The review suggests that there are several motivations to remit and it does not seem that one specific motivation has been consistently selected over the others. The literature also suggests that remittances have the potential to impact a large number of variables related to the recipient country and household.

Introduction

The large increase in remittances (money transfers from migrants to family and friends back home) during the last two decades has stimulated a keen interest in understanding the nature and economic consequences of these flows. Policymakers in developing countries and international organizations around the world have become interested in increasing the flow of remittances, finding ways to channel remittances into productive investments, and diminishing the possible detrimental impacts of these transfers. On the other hand, due to concerns regarding money laundering and terrorism support, policymakers in developed countries are interested in seeing a larger share of remittances sent through official channels. In fact, policymakers and government officials from countries that are host to large communities of migrants are encouraging increased supervision on the part of receiving countries on the use of remittances.

The remittances phenomenon has also drawn attention from the private business sector. Given the potential for profit in the money transfer business, there has been a proliferation of money transfer agencies. Banks have also been encouraged to participate in the remittances market, not only by being more competitive in their fees and processes, but also by recognizing that offering remittance services can help in attracting migrants to open bank accounts in the host country.

In this article we present a review of the empirical literature on remittances. That is, we want to assess the different conclusions that have been drawn from the data and evaluate what can be said with relative confidence about remittances. We also want to highlight the open-ended questions that still remain and ascertain the facts that are still in doubt.

Organization of the Literature Review

The literature on remittances is divided into two main areas of study. The first area investigates the nature and determinants of these flows. We look at questions like: What prompts a migrant to remit? What factors determine the amount of remittances they send? The second area of study is concerned with the impacts and consequences of these money transfers. That is, we look at the impacts of these money flows on the receiving countries and on household behavior. We look at questions such as: How are these flows affecting family composition? What are the consequences for the distribution of labor? What are the impacts on prices, the exchange rate and the overall economy? To answer those and other related questions we review the extant literature and differentiate between the different studies that use data on the migrant, the household (or both) and those that use aggregate economic data.

The literature on the determinants of remittances, our first area of study, is divided into two specific groups. The first group includes those studies that use microeconomic level data to study the determinants of remittance transfers. Most of these studies make use of survey data on the emigrants and/or the receiving households. This type of study is usually interested in the relationship between remittances and individual specific factors such as income (household and migrant), gender, age, time abroad, marital status and household composition, among others. …

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