To send, or not to send: that is the question. A review of the literature on workers' remittances.(Report)

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