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Remittances and Migration

Migrating to another country is one of the most effective routes out of poverty for many people from developing countries.  This migration brings with it a host of related development impacts on the sending countries - through remittances, Diaspora effects, return migration, knowledge transfer, and other channels.  Our research focuses on a broad range of topics related to migration and remittances, including work on the determinants of remittance costs, the consequences of migration and remittances for families remaining in the home country, and work on highly skilled migration. 

Remittances, funds received from migrants working abroad, to developing countries have grown dramatically in recent years from U.S.$18 billion in 1980 to over U.S.$126 billion in 2004. They have become the second largest source of external finance for developing countries after foreign direct investment (FDI), both in absolute terms and as a proportion of GDP. Furthermore, unlike, other capital flows, remittances tend to be stable even during periods of economic downturns and crises.

The development potential of these flows is increasingly being recognized and therefore interest in remittances and their impact is growing among governments, international organizations, and the private sector. Yet, research on remittances is sparse and limited mainly to country-specific surveys that examine the effects of remittances on poverty, education, and health among other things. On the other hand, the effect of remittances on financial development remains largely unexplored, despite the increasing interest on the part of financial institutions both in the remittance source and destination countries to enter this business as a way to expand their customer base.

Furthermore, this topic is empirically interesting because, a priori, the links between remittances and financial sector development are unclear. Remittances might have a positive impact on credit market development if, as individuals receive sizeable transfers from abroad that are shown to be stable, banks become more willing to extend loans to remittance recipients. On the other hand, because remittances might help relax individuals’ financing constraints, these flows might also lead to a lower demand for credit and have a dampening effect on credit market development. At the same time, whether we observe a positive relationship between remittances and financial development measured in terms of deposits will depend on the extent to which households are able to save part of the remittances they receive and do so by depositing these funds with banks.

We analyze the impact of remittances on financial development using both balance of payment statistics for close to 100 countries over the period 1970-2002 and household survey based data for Mexico (2000) and El Salvador (1995, 1997, 1999, 2001).


Policy Research Working Papers

For more policy research working papers from the World Bank's institutional archives, 
search here using author’s last name, title or working paper number (“wpsxxxx”).




WPS6689Unilateral facilitation does not raise international labor migration from the PhilippinesBeam, Emily; McKenzie, David; Yang, Dean2013/11
WPS6644Telecommunications externality on migration : evidence from Chinese VillagesLu, Yi; Xie, Huihua; Xu, Lixin Colin2013/10
WPS6426Eliciting illegal migration rates through list randomizationMcKenzie, David; Siegel, Melissa2013/04
WPS6157Who you train matters : identifying complementary effects of financial education on migrant householdsDoi, Yoko; McKenzie, David; Zia, Bilal2012/08
WPS5839Remittances and financial inclusion : evidence from El SalvadorAnzoategui, Diego; Demirguc-Kunt, Asli; Martinez Peria, Maria Soledad2011/10

WPS5668Eight questions about brain drainGibson, John; McKenzie, David2011/05
WPS5488The development impact of a best practice seasonal worker policyGibson, John; McKenzie, David2010/11
WPS5395Experimental approaches in migration studiesMcKenzie, David; Yang, Dean2010/08
WPS5394The economic consequences of "brain drain" of the best and brightest: microeconomic evidence from five countriesGibson, John ; McKenzie, David2010/08
WPS5268Accounting for selectivity and duration-dependent heterogeneity when estimating the impact of emigration on incomes and poverty in sending areasGibson, John; McKenzie, David; Stillman, Steven2010/04
WPS5260The remitting patterns of African migrants in the OECDBollard, Albert; McKenzie, David; Morten, Melanie2010/04
WPS5113Remittances and the brain drain revisited : the microdata show that more educated migrants remit moreBollard, Albert; McKenzie, David; Morten, Melanie; Rapoport, Hillel2009/11
WPS5072What explains the cost of remittances ? an examination across 119 country corridorsBeck, Thorsten; Martinez Peria, Maria Soledad2009/10
WPS4983Remittances and banking sector breadth and depth : evidence from MexicoDemirguc-Kunt, Asli; Lopez Cordova, Ernesto; Martinez Peria, Maria Soledad; Woodruff, Christopher2009/06
WPS4956The impacts of international migration on remaining household members : omnibus results from a migration lottery programGibson, John; McKenzie, David; Stillman, Steven2009/06

WPS4965The microeconomic determinants of emigration and return migration of the best and brightest : evidence from the PacificGibson, John; McKenzie, David2009/06
WPS3957Do workers' remittances promote financial development ?Aggarwal, Reena; Demirguc-Kunt, Asli; Martinez Peria, Maria Soledad2006/07

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