A recent World Bank study led by Dilip Ratha says that global remittances--the money that migrants send home--exceeds $300 billion per year. Jason DeParle of The New York Times covered the study, "World Banker and His Cash Return Home":
India ($27 billion), China ($26 billion) and Mexico ($25 billion) are the leading beneficiaries. But in relative terms, small countries gain the most, with some increasing their national incomes by more than 20 percent. Egypt gets more from remittances than it does from the Suez Canal.
More on Ratha’s pioneering work (also view an audio slide show, "Return to Sindhekela"):
When Mr. Ratha reached the World Bank in the early 1990s, most economists saw remittances as small private sums that were irrelevant to development. After years of sending money home, he took a closer look.
Given the scorekeeping at central banks, it was an exercise in forensic accounting.
The International Monetary Fund said the Philippines received $122 million. Mr. Ratha produced an estimate 51 times higher: $6.2 billion. His tallies, first published in 2003, showed that remittances, once dismissed as the equivalent of a rounding error, were nearly three times greater than the world’s combined foreign aid.
“That was a bombshell,” said Kathleen Newland, a founder of the Migration Policy Institute, a Washington research group. “Putting it in that context made people see there was this enormous flow of money into the developing world. Dilip really is the person who put remittances on the map.”
Phil Izzo has more at the WSJ blog Real Time Economics (which also cites Ratha):
The U.S., which was the top immigration country in 2005 with 38.4 million immigrants, is by far the largest source of outflows, with $42 billion in recorded outward flows in 2006. Saudi Arabia ranks as the second largest, followed by Switzerland and Germany. The Mexico-U.S. corridor is the largest migration corridor in the world, the Worlds Bank said, accounting for 10.4 million migrants by 2005.
However, there has been plenty of criticism of remittances. From the Times:
When officials from more 150 countries met in Brussels last summer, remittances figured high on the agenda. Skeptics smell a fad.
“Remittances: the New Development Mantra?” asked an article by Devesh Kapur of the University of Pennsylvania. He sees the money as a palliative that, while at times helpful in easing poverty symptoms, leaves underlying structures unchanged. “If I ask can you name a single country that has developed through remittances, the answer is no — there’s none,” he said.
Some critics fear the focus on remittances obscures broader concerns about migration, including the potential costs to children left behind. “Behind every remittance, there’s a separated family,” said Elizabeth Gibbons, a senior official at Unicef.
Some see the money as a pittance that deflects attention from migrant exploitation. “It tends to justify the way the world economy is being restructured for the benefit of a small elite,” said Raul Delgado Wise of the University of Zacatecas in Mexico.
According to the article, most of the money remitted is spent on consumption and does not necessarily impact development. Critics have argued that if remittances brought development, Mexico would be Switzerland. But Ratha, who has supported his family and relatives and built a school in his hometown, believes otherwise.
Mulling a leap from thinker to doer, he has drafted plans for an “International Remittances Institute,” to provide cheaper ways to send money — fees often exceed 10 percent — and more options for investing it. Easier access to banks, for example, might improve migrants’ savings rates and expand local lending pools.
However, Ratha himself is ambivalent about his decision to leave India, and the utility of the money he sends back home.
If he is enthusiastic about migration, he has lived it on especially favorable terms. He has never crossed borders illegally or worked with dirty hands. He commands a salary 100 times higher than he would if he had never left home. With it, he has educated two younger siblings, paid for a nephew’s life-saving operation, and built a big house for his father.
Yet a visit to Sindhekela [his hometown] last month also suggests the limits of long-distance giving and the migrants’ psychological strains. Old friends want money. A younger brother has squandered his help. An effort to upgrade the local high school has met with ambiguous results.
His father, at 78, worries about dying alone. His older sister frets that he eats with a fork. Both speak Sambalpuri, meaning his Venezuelan wife and his American sons, all English speakers, cannot talk to them.
Globe-trotting technocrat, village boy made good, Mr. Ratha is like many migrants torn between two worlds and fully at home in neither. “On bad days, I do feel lonely in a way that I can’t explain,” he said.
Download and read the Ratha study in PDF. Full title: " Migration and Development Brief 3
Development Prospects Group, Migration and Remittances Team
November 29, 2007
Remittance Trends 2007
Dilip Ratha, Sanket Mohapatra, K. M. Vijayalakshmi, Zhimei Xul
And here's Ratha's personal site.
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Previously on SAJAforum: