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Economic Effects of Remittances on Migrants’ Country of Origin

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The Economic Geography of Cross-Border Migration

Part of the book series: Footprints of Regional Science ((VRS))

Abstract

The potential development impacts of migrant remittances have been subject of extensive theoretical and empirical explorations. This chapter reviews the economic effects of remittances on migrants’ countries of origin, focusing specifically on how the receipts of remittances shape norms, consumption, investment and inequality at the household level, and how these household-level impacts shape country-level outcomes. The reviewed literature suggests that the effects of remittances on economic outcomes are context-specific and shaped by the heterogeneity of migrants, their motivations to migrate, and the development status and institutional settings in their countries of origin. The review of household-level studies nevertheless identifies overall positive effects of remittances on consumption more generally, and on durable goods specifically for the not-too-poor households; they also demonstrate positive effects on households’ agricultural production, household expenditures on education and physical capital investment and entrepreneurial activities. Much in line with the findings from household studies, the macroeconomic studies demonstrate generally positive effects of remittances on poverty reduction, living standards, health and education expenditures and improving institutions. Both household and macro-level studies suggest mixed results related to the impact of remittances on inequality, however, and macro studies demonstrate particularly mixed and even negative direct effects of remittances on economic growth.

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Notes

  1. 1.

    Several studies have identified that households and families may essentially act as informal insurance providers that help smooth the consumption of individual household members against the effect of negative income shocks; see, e.g. Stark (1991), and Agarwal and Horowitz (2002).

  2. 2.

    A separate strand of theory has emerged that explores motivations for remittances. For example, contributions from Johnson and Whitelaw (1974) and Lucas and Stark (1985) identify altruism—a migrant’s desire to ensure his/her family members well-being—as a main motivation for remittance-sending; others (e.g. Ilahi and Jafarey, 1999; Poirine, 1997) model remittances as repayment for an informal, family-based ‘loan’ that financed the initial migration.

  3. 3.

    Ivlevs et al. (2019) consider the effects of remittances on mental health and subjective well-being.

  4. 4.

    We had to limit referencing and have chosen to do so in this section because our core task is ‘effects of remittances’.

  5. 5.

    Naiditch et al. (2015) make a theoretical argument that remittances relaxing the credit constraint may lead to the opposite u-shape, which we interpret as a mitigation of the empirical one.

  6. 6.

    See Roy and Dixon (2016), Uddin and Murshed (2017) for South Asia; Chowdhury and Rabbi (2014) for Bangladesh.

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Acknowledgements

The authors are grateful for useful comments from two anonymous referees. Remaining errors are entirely ours.

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Authors and Affiliations

  1. Department of Economics, Faculty of Political Science, Social Sciences University of Ankara, Ankara, Turkey

    Barış Alpaslan

  2. Sheffield Institute for International Development, University of Sheffield, Sheffield, UK

    Barış Alpaslan

  3. Crawford School of Public Policy, Australian National University, Centre for Applied Macroeconomic Analysis, Canberra, Australia

    Barış Alpaslan

  4. Economic Research Forum, Giza, Egypt

    Barış Alpaslan & Aysegul Kayaoglu

  5. Department of Economics, Istanbul Technical University, Istanbul, Turkey

    Aysegul Kayaoglu

  6. Faculty of Economics and Business Studies, Justus-Liebig University Giessen, Gießen, Germany

    Jürgen Meckl

  7. Department of Economics, University of Girona, Girona, Spain

    Joaquín Naval

  8. Graduate School of Governance/United Nations, University-MERIT, Maastricht University, Maastricht, The Netherlands

    Michaella Vanore

  9. Department of Economics, Maastricht University, UNU-MERIT, P.O. Box 616, 6200 MD, Maastricht, The Netherlands

    Thomas H.W. Ziesemer

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Alpaslan, B., Kayaoglu, A., Meckl, J., Naval, J., Vanore, M., Ziesemer, T.H. (2021). Economic Effects of Remittances on Migrants’ Country of Origin. In: Kourtit, K., Newbold, B., Nijkamp, P., Partridge, M. (eds) The Economic Geography of Cross-Border Migration. Footprints of Regional Science(). Springer, Cham. https://doi.org/10.1007/978-3-030-48291-6_20

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