Socioeconomic Effects of Remittances and Migration. David McKenzie World Bank. Growing importance of remittances worldwide. Developing countries recorded remittances have surged in recent years: 73% increase between 2001 and 2005 More than five times as large as in 1990 Reflects:
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Socioeconomic Effects of Remittances and Migration
E.g. Mexican Migration Project
=> View remittances as leading to a “cycle of dependency”, money as being wasted on food, drinks, fiestas and conspicuous consumption.
Outcome = a + b*Remittances + c’X + e
Approach 1: Treat remittances as manna from heaven…
- assume some households just happen to receive remittances, see what they spend the additional income on
- Problem: suppose I only send remittances to my family when someone is sick – then I would see households which receive remittances have worse health!
=> PINZMS asks migrants and their families expectations for remittances.
Absent parents – may require kids to do things for parents
Incentives to migrate – seeing parents do well abroad with low schooling lowers incentives to get education.
Hildebrandt and McKenzie (2006):
We use distance in Tonga to the NZ embassy
- this affects likelihood of applying to migrate
- but shouldn’t affect incomes in NZ
Get an estimate of NZ $279 (only 1.8% different from experimental estimator)
…but a bad instrument can really hurt…
Use migrant network in New Zealand
Problem: this is AFTER remittances
Problem: treats remittances as manna from heaven
i.e. income of other household members affected by receipt of remittances and by migration
=> Need to consider all these factors when attempting to look at poverty impact