”Making Cents: Choosing the Right Instruments to Catalyze Private Investment in Developing Countries” by Theo Talbot, Centre for Global Development

1. Migration, Remittances,
and Economic Development
Dean Yang
University of Michigan

2. 2
• Between 1965 and 2010, the fraction of people living outside
their countries of birth increased from 2.2% to 3.1% of world
population
– Estimated 247 million migrants in 2013
• These migrants send home huge amounts of remittances, an
international financial flow that compares favorably in
magnitude with FDI and ODA
– Estimated US$436 billion in 2014
MotivationThe basic numbers

3. 3
• Vast numbers of people in low-income countries want to
emigrate, but cannot
• Gallup World Poll: more than 40 percent of adults in the
poorest quartile of countries “would like to move permanently
to another country” if they had the opportunity
• In 2010, U.S. Diversity Visa Lottery had 13.6 million
applications for 50,000 visas, or 272 applicants per slot
• Main motivation: dramatic increases in wages upon migration
(Source: Clemens 2011, and citations therein)
MotivationDemand for migration is high

4. 4
Notes: Ratios of U.S. to home-country wages for 35-year-old male urban worker with 9 years of education acquired in home country. Comparison is
between individuals observed in U.S. data vs. home-country data. Source: Clemens, Montenegro, and Pritchett (2009).
MotivationWage gains from international migration
15.5
14.9
11.9
7.5
6.3
5.2
3.8
3.5
2.8 2.7 2.5
2.2
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
18.0
RatioofU.S.tohome-countrywages
Among top 10 sources of immigration
to Sweden
(Others include Iraq, Iran, Bosnia.)

5. 5
MotivationRemittances vs. other international financial flows
Data show international financial flows to developing countries.
Source: World Bank Development Prospects Group, “Migration and Development Brief 24,” April 13, 2015.

6. 6
MotivationTop remittance recipient countries
Source: World Bank Development Prospects Group, “Migration and Development Brief 24,” April 13, 2015.

7. 7
• Remittances bring substantial benefits at the household level
– Higher consumption, lower poverty
– Increased investments in human capital, small enterprises
• In addition, remittances serve as insurance, rising when origin
areas experience negative economic shocks
• Most evidence is correlational, but some natural experiments
confirm impacts are causal
MotivationRemittances and development
Source: Yang (2011).

8. 8
Source: Yang (2008).
MotivationA natural experiment among Filipino migrants
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1.1
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1.6
1.7
Jul96
Aug96
Sep96
Oct96
Nov96
Dec96
Jan97
Feb97
Mar97
Apr97
May97
Jun97
Jul97
Aug97
Sep97
Oct97
Nov97
Dec97
Jan98
Feb98
Mar98
Apr98
May98
Jun98
Jul98
Aug98
Sep98
Oct98
Month
Malaysia
Korea
Taiwan
Singapore
Japan
Start of
Asian
financial
crisis
(July 1997)
Exchange Rates in Selected Locations of Overseas Filipinos (Jul 1996 - Oct 1998)
US,
Hong Kong,
Saudi Arabia,
Kuwait
Start of
Asian
financial
crisis
(July
1997)

9. 15.0%
13.0%
3.5%
1.8%
11.6%
27.7%
-16.7%
-20%
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
30%
Effectof25%improvementinmigrant'sexchangerate
9
Source: Yang (2008).
MotivationImpact of positive migrant exchange rate shocks
Positive exchange rate shocks for migrants led to
higher remittances, and a variety of other substantial
benefits for migrants’ origin households in the
Philippines.

10. 10
• Decentralized nature of remittances poses challenges for policy
– How to encourage individual migrants to send more?
– How to channel remittances to particular ends without
choking off the flow?
• We still are still learning about policies that can:
– Encourage migrants to send more remittances
– Channel remittances towards uses with more long-term
development impacts
MotivationRemittance policies for development

11. 11
• Enhance migrant control over financial decisions at home
– Savings experiments
• Banco Agricola study
• Matricula consular study in Texas
– Eduremesa study with Viamericas
– Edupay study with Bank of the Philippine Islands
• Provide financial education
– Educating migrant families in Indonesia
– Motivating migrants in Qatar
• Reduce remittance transaction fees
MotivationEnhancing remittance impacts on development

12. 12
“I have many uncles and they get drunk, so I just send
money when needed, or I send to someone like my sister who I
trust.”
Male, 34 years old, 8 months in the U.S., works as a roofer
“The brother of my boss sent around $50,000 to his mother
over the years. When he thought he had enough money to build a
house, he asked his mom for the money. She said she didn't have
it. She had lent it to an uncle. When he asked for the money back,
the uncle threatened to kill him if he came back to El Salvador for
the money.”
Male, 30 years old, 1 year in the U.S., works as a carpenter
MotivationDC-area Salvadorans on remittance uses

13. 13
• Migrants currently have limited ability to monitor or control how
remittances are used by recipients
• Migrants and recipients have different preferences as to how
remittances should be used
• In particular, compared to remittance recipients back home,
migrants often have stronger preferences that remittances be
saved rather than spent immediately
• If migrants are given more control over remittance uses…
– Remittance flows might be affected
– And a higher fraction of remittances may be channeled to uses
that have long-term development impacts
MotivationEnhancing migrant control at home

14. Migrant vs. recipient remittance allocation (US$)
Source: El Salvador Study of Migrant Families (ESSMF), Ashraf et al (2015)

15. 15
• We offered Salvadoran migrants in metro Washington, DC the
ability to directly channel remittances into savings accounts in El
Salvador (Ashraf et al, 2015)
– Facilities developed for project in partnership with a
Salvadoran bank, Banco Agricola
• Implemented as a randomized controlled trial (RCT)
– We randomly assigned migrants to a control group or to one of
three treatment groups
– Treatments involved offering different types of Banco Agricola
bank accounts
– Control group that was surveyed but did not receive the
savings intervention
MotivationSavings intervention among Salvadorans in DC

16. 19
MotivationImpact on savings at Banco Agricola
$186
$231
$334
$482
$0
$100
$200
$300
$400
$500
$600
Control Treatment 1 Treatment 2 Treatment 3
SsvingsatBancoAgricola(US$)
(Savings account for
recipient only)
(T1 + joint account for
migrant and recipient)
(T2 + account for
migrant only)
**
Note: Savings is average balance in total across all Banco Agricola accounts, over 12 months post-treatment.

17. 20
• No identifiable impact on savings when channeling remittances
only to bank accounts for remittance recipients
• Substantial positive impacts of offering suite of options that allow
migrants monitoring and control over home country savings
• Matricula consular study in Texas provides complementary
findings (Chin et al, 2011)
– Increased bank account opening and savings in U.S.
– Migrants appear to value control over savings in the U.S. as
well
MotivationTakeaways from Banco Agricola study

18. 21
• Funding for education
– Eduremesa study with Viamericas (Ambler et al, 2015)
• Migrants direct remittances to education when
offered matching funds, but not otherwise
• Positive impacts on student outcomes in El Salvador
– Edupay study with Bank of the Philippine Islands (De
Arcangelis et al 2015)
• Filipino migrants send more remittances when
“labeled” for education
• Not much additional impact of directing funds to
schools
• Control over grocery expenditures (Torero and Viceisza 2013)
– No apparent demand for control in this domain
MotivationControl over other uses of remittances

19. 22
• Enhance migrant control over financial decisions at home
– Savings experiments
• Banco Agricola study
• Matricula consular study in Texas
– Eduremesa study with Viamericas
– Edupay study with Bank of the Philippine Islands
• Provide financial education
– Educating migrant families in Indonesia
– Motivating migrants in Qatar
• Reduce remittance transaction fees
MotivationFinancial innovations for transnational households

20. 23
• Financial literacy training for migrants before departure, and their
families (Doi et al. 2014)
– Indonesian female migrants, departing to work as maids
– Training both the migrant and family led to increases in
savings in the origin household
– No similar impact of training migrant only or family only
– Key takeaway: complementarity from training both migrants
and family members
• Motivational session for married male migrants in Qatar from
Kerala, India (Seshan and Yang 2014)
– Treatment was a one-time motivational session on personal
finance
– Among migrants with lower savings at baseline (prior to
treatment) treatment led to higher total (Qatar plus India)
household savings and higher remittances sent by migrants to
wives
MotivationFinancial training for transnational households

21. 24
MotivationImpact on migrant savings, remittances
Savings Remittances
52,593
35,742
0
10,000
20,000
30,000
40,000
50,000
60,000
Low savings subsample
Indianrupees(INR)
Treatment Control
155,333
139,309
130,000
135,000
140,000
145,000
150,000
155,000
160,000
Low savings subsample
Indianrupees(INR)
Treatment Control
Source: Seshan and Yang (2014)

22. 25
• Enhance migrant control over financial decisions at home
– Savings experiments
• Banco Agricola study
• Matricula consular study in Texas
– Eduremesa study with Viamericas
– Edupay study with Bank of the Philippine Islands
• Provide financial education
– Educating migrant families in Indonesia
– Motivating migrants in Qatar
• Reduce remittance transaction fees
MotivationFinancial innovations for transnational households

23. 26
• asdf
MotivationExperiment with money transmitter Viamericas
• On-the-spot survey of remitters
• Randomized discount on
Viamericas transactions to
“primary remittance recipient”
(PRR)

24. 27
• Two studies
– With Banagricola among Salvadorans (Aycinena et al 2010)
• Provided discounts in increments of $1 to $5 (off base of
$9), valid for 12 months
– With Viamericas among Salvadorans and Guatemalans (Ambler
et al 2014)
• Provided discount of $3 (off base of $8), valid for 10 weeks
• Both studies find large, positive impacts on transactions and total
dollars remitted
MotivationStudies on impact of fee reductions

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Control Treatment
28
MotivationRemittance transactions to PRR
Time periods are 2-week intervals to reduce noise. Graph shows total number of remittances sent
during the 2-week interval.
• No evidence that remitters reduce
their remittances later
Discount period

26. 29
Time periods are 2-week intervals to reduce noise. Remittances are total $ sent during the 2-week
interval.
MotivationRemittances in $ to PRR
Discount period
$0
$50
$100
$150
$200
$250
$300
Totalremittances($)
Discount Control
• Clear positive impact on $
remittances to PRR

27. 30
• Recent experimental findings point the way towards promising
policies to promote financial inclusion of migrants and their
families
– Bank account offers to migrants raise savings – in host and
origin countries – but only when migrants have control over
accounts
– Migrants also seek to direct remittances to education
– Financial education can increase transnational household
savings
– Price discounts stimulate remittances, at least in the short run
MotivationIn sum

28. 31
• What is impact of simply labeling remittances for specific
purposes, such as education?
• Would migrants guarantee microloans for borrowers in
the home country?
• Can we facilitate remittances-as-insurance?
– Provide discounts on remittance fees when natural
disasters occur in home country?
MotivationOpen questions

29. 32
Ambler, Kate, Diego Aycinena, and Dean Yang (2015), “Channeling Remittances to Education: A Field Experiment among Migrants from El Salvador,”
American Economic Journal: Applied Economics, Vol. 7, No. 2, April, pp. 207-232.
Ambler, Kate, Diego Aycinena, and Dean Yang (2014), “Remittance Responses to Temporary Discounts: A Field Experiment among Migrants from Central
America,” NBER Working Paper 20522, September.
Ashraf, Nava, Diego Aycinena, Claudia Martinez A., and Dean Yang (2015), “Savings in Transnational Households: A Field Experiment among Migrants from
El Salvador,” Review of Economics and Statistics, Vol. 97, No. 2, May, pp. 332-351.
Aycinena, Diego, Claudia Martinez A., and Dean Yang (2010), “The Impact of Transaction Fees on Migrant Remittances: Evidence from a Field Experiment
among Migrants from El Salvador,” working paper.
Chin, Aimee, Leonie Karkoviata, and Nathaniel Wilcox (2011) “Impact of Bank Accounts on Migrant Savings and Remittances: Evidence from a Field
Experiment,” working paper.
Clemens, Michael, Claudio Montenegro, and Lant Pritchett (2009), “The Place Premium: Wage Differences for Identical Workers across the U.S. Border,”
Center for Global Development Working Paper 148.
Clemens, Michael (2011), “Economics and Emigration: Trillion Dollar Bills on the Sidewalk?” Journal of Economic Perspectives, Vol. 25, No. 3, Summer, pp.
83-106.
De Arcangelis, Giuseppe, Majlinda Joxhe, David McKenzie, Erwin Tiongson, and Dean Yang (2015), “Directing Remittances to Education with Soft and Hard
Commitments: Evidence from a Lab-in-the-field Experiment and New Product Take-up among Filipino Migrants in Rome,” Journal of Economic Behavior and
Organization, Vol. 111, March, pp. 197-208.
Doi, Yoko, David McKenzie and Bilal Zia (2014), “Who You Train Matters: Identifying Complementary Effects of Financial Education on Migrant Households,”
Journal of Development Economics, 109, pp. 39-55.
Seshan, Ganesh and Dean Yang (2014), “Motivating Migrants: A Field Experiment on Financial Decision-Making in Transnational Households,” Journal of
Development Economics, 108: 119-127.
Torero, Maximo and Angelino Viceisza (2013), “To remit, or not to remit: that is the question. A remittance field experiment,” working paper.
World Bank, “Migration and Development Brief 24,” Development Prospects Group, April 13, 2015.
Yang, Dean (2008), “International Migration, Remittances, and Household Investment: Evidence from Philippine Migrants’ Exchange Rate Shocks,”
Economic Journal, Vol. 118, April, pp. 591-630.
Yang, Dean (2011), “Migrant Remittances,” Journal of Economic Perspectives, Vol. 25, No. 3, pp. 129-152.
MotivationReferences