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”).
|WPS6689||Unilateral facilitation does not raise international labor migration from the Philippines||Beam, Emily; McKenzie, David; Yang, Dean||2013/11|
|WPS6644||Telecommunications externality on migration : evidence from Chinese Villages||Lu, Yi; Xie, Huihua; Xu, Lixin Colin||2013/10|
|WPS6426||Eliciting illegal migration rates through list randomization||McKenzie, David; Siegel, Melissa||2013/04|
|WPS6157||Who you train matters : identifying complementary effects of financial education on migrant households||Doi, Yoko; McKenzie, David; Zia, Bilal||2012/08|
|WPS5839||Remittances and financial inclusion : evidence from El Salvador||Anzoategui, Diego; Demirguc-Kunt, Asli; Martinez Peria, Maria Soledad||2011/10|
|WPS5668||Eight questions about brain drain||Gibson, John; McKenzie, David||2011/05|
|WPS5488||The development impact of a best practice seasonal worker policy||Gibson, John; McKenzie, David||2010/11|
|WPS5395||Experimental approaches in migration studies||McKenzie, David; Yang, Dean||2010/08|
|WPS5394||The economic consequences of "brain drain" of the best and brightest: microeconomic evidence from five countries||Gibson, John ; McKenzie, David||2010/08|
|WPS5268||Accounting for selectivity and duration-dependent heterogeneity when estimating the impact of emigration on incomes and poverty in sending areas||Gibson, John; McKenzie, David; Stillman, Steven||2010/04|
|WPS5260||The remitting patterns of African migrants in the OECD||Bollard, Albert; McKenzie, David; Morten, Melanie||2010/04|
|WPS5113||Remittances and the brain drain revisited : the microdata show that more educated migrants remit more||Bollard, Albert; McKenzie, David; Morten, Melanie; Rapoport, Hillel||2009/11|
|WPS5072||What explains the cost of remittances ? an examination across 119 country corridors||Beck, Thorsten; Martinez Peria, Maria Soledad||2009/10|
|WPS4983||Remittances and banking sector breadth and depth : evidence from Mexico||Demirguc-Kunt, Asli; Lopez Cordova, Ernesto; Martinez Peria, Maria Soledad; Woodruff, Christopher||2009/06|
|WPS4956||The impacts of international migration on remaining household members : omnibus results from a migration lottery program||Gibson, John; McKenzie, David; Stillman, Steven||2009/06|
|WPS4965||The microeconomic determinants of emigration and return migration of the best and brightest : evidence from the Pacific||Gibson, John; McKenzie, David||2009/06|
|WPS3957||Do workers' remittances promote financial development ?||Aggarwal, Reena; Demirguc-Kunt, Asli; Martinez Peria, Maria Soledad||2006/07|