Remittances and Development Lessons from Latin America

by Fajnzylber, Pablo; Lopez, J. Humberto

• ISBN13: 9780821368701
• ISBN10: 0821368702
• Format: Paperback
• Copyright: 2008-02-08
• Publisher: World Bank Publications

Summary

Workers' remittances have become a major source of financing for developing countries and are especially important in Latin America and the Caribbean (LAC), which is at the top of the ranking of remittances receiving regions in the world. While there has been a recent surge in analytical work on the topic, this book is motivated by the large heterogeneity in migration and remittances patterns across countries and regions, and by the fact that existing evidence for LAC is restricted to only a few countries, such as Mexico and El Salvador. Because the nature of the phenomenon varies across countries, its development impact and policy implications are also likely to differ in ways that are still largely unknown. This book explores the gap in the specific context of Latin America and Caribbean countries, some of the main questions faced by policymakers when trying to respond to increasing remittances flows.

Table of Contents

Foreword	p. xix
Acknowledgments	p. xxi
Abbreviations	p. xxiii
The Development Impact of Remittances in Latin America	p. 1
How Important Are Remittances in Latin America?	p. 21
Migration and Remittances in Latin America: Patterns and Determinants	p. 51
Do Remittances Lower Poverty Levels in Latin America?	p. 87
Remittances and Household Behavior: Evidence for Latin America	p. 133
Do Remittances Affect Recipient Countries' Financial Development?	p. 171
Remittances, the Real Exchange Rate, and the Dutch Disease Phenomenon	p. 217
Do Conditional Cash Transfer Programs Crowd Out Private Transfers?	p. 253
Facilitating Remittances Flows and Security in the System	p. 299
Remittances and Growth: The Role of Complementary Policies	p. 335
Index	p. 369
Boxes
Conditional Cash Transfers in Colombia	p. 257
The General Principles for International Remittances Services	p. 301
The AML/CFT Regulations	p. 303
Regulatory Requirements in the United States as Barriers to Entry	p. 305
Money in Minutes or Next Day	p. 317
Official Efforts for Transparency in the U.S.-Mexico Remittances Market	p. 318
Linking Credit Unions through the International Remittance Network (IRnet)	p. 322
Remittances and Forced Savings: The Bracero Program	p. 336
Control Set in the Empirical Model	p. 345
Control Set in the Empirical Model for the Investment Rate	p. 362
Figures
Regional Distribution of Remittances in 2005	p. 23
Annual Growth Rate of Recorded Remittances, 1980-2005	p. 24
International Financial Flows, 1990 and 2005	p. 25
Remittances in Latin America, 1980-2005	p. 26
Remittances in Latin America in 2005	p. 28
Share of Households Receiving Remittances, 2001	p. 31
Households Receiving Remittances by Income Distribution Quintile	p. 32
Households Receiving Remittances by Quintile of Nonremittances Income Distribution	p. 34
Households Receiving Remittances by Quintile of Total Income Distribution	p. 35
Educational Characteristics of Households Receiving Remittances	p. 37
Average Annual Amount Reported by Recipients	p. 39
Income Share of Remittances by Income Quintile (Recipients Only)	p. 41
Income Share of Remittances by Income Quintile (All Households)	p. 42
Income and Remittances Distribution by Income Quintile	p. 43
BOP-Based versus Household Survey-Based Remittances	p. 46
Latin American Migrants	p. 54
Major Destinations of Latin American Migrants	p. 57
Major European Destinations of Latin American Migrants, 2000	p. 58
Age Profile at the Time of Arrival for Latin American Migrants	p. 58
Current Age Profile of Latin American Migrants	p. 59
Education Profile of 1990s Latin American and Caribbean Migrants (Age 22 and Older)	p. 60
Education Profile of Native Population versus Migrants from Latin American and Caribbean Countries	p. 61
Share of Migrants in the United States with Tertiary Education	p. 63
Share of Educated Workers Who Migrate	p. 64
Share of College-Educated Workers in the United States Who Received Their Degrees at Home	p. 65
Share of Migrants in the United States with College Degrees According to Age of Entry	p. 65
Occupational Distribution of Migrants in the United States Older than 22 at Time of Arrival (Current Age 22+)	p. 66
Occupational Distribution of Migrants in the United States Who Were Younger than 17 at Time of Arrival (Current Age 22+)	p. 67
Brain Waste: Home Tertiary Educated Migrants in the United States Who Were Older than 25 on Arrival	p. 68
Remittances as a Share of GDP	p. 70
Remittances Received Per Capita	p. 71
Remittances Sent Per Migrant	p. 71
Migrants as a Share of Population	p. 72
Share of Female Migrants	p. 73
Share of College Graduate Migrants	p. 74
Ratio of Bank Deposits to GDP	p. 75
Scatter Plots of Remittances, Growth, and Investment	p. 111
Remittances' Sensitivity to Output Fluctuations in Recipient Countries	p. 120
Remittances' Sensitivity to Output Fluctuations in Sending Countries	p. 121
Country Estimates of Remittances' Sensitivity to Own Output	p. 121
The Response of Remittances to Macroeconomic Crises	p. 123
Differences in Savings Rates by Remittances-Recipient Status	p. 135
Expenditure Patterns by Remittances-Recipient Status-Rural Regions	p. 140
Expenditure Patterns by Remittances-Recipient Status-Urban Regions	p. 141
Expenditure in Nondurables (Including Food) and Education by Remittances-Recipient Status and Counterfactual Income Quintile: Mexico	p. 147
Expenditure in Nondurables (Including Food) and Education by Remittances-Recipient Status and Counterfactual Income Quintile: Nicaragua	p. 148
Average Years of Education for Adults (22-65 Years Old)	p. 150
Differences in School Enrollment Rates for Children 12-17 Years Old by Remittances-Recipient Status	p. 150
Anthropometric Measures for Children Ages 1-5, by Remittances-Recipient Status: Guatemala	p. 157
Anthropometric Measures for Children Ages 1-5, by Remittances-Recipient Status: Nicaragua	p. 157
Labor Force Participation of Adults (20-59 Years Old), by Gender and Remittances-Recipient Status	p. 161
Remittances and Financial Development in Latin American Countries	p. 175
Remittances and the Real Exchange Rate	p. 226
Exports and the Real Exchange Rate	p. 227
Imports and the Real Exchange Rate	p. 229
Production Structure of the Jamaica CGE Model	p. 247
Channels for Remittances (2004)	p. 310
Reasons for Not Having a Bank Account	p. 312
Perceptions on Why the Total Cost of Remittances Transfers Are Higher than the Flat Commissions Paid by Senders	p. 314
Cost of Sending a US$300 Remittance from Chicago to Mexico (March 2006)	p. 315
Fees as Percentage of Remittance-Illinois to El Salvador (March 2006)	p. 316
Fees and Exchange Rate Costs	p. 316
Range of Prices of Remittance Services in the U.S.-Mexico Corridor, 1999-2005 (Percent of Amount Sent)	p. 320
Secondary Net Enrollment Deficit in Selected Latin American Countries	p. 339
Institutional and Per Capita Income Levels	p. 340
Domestic Credit to the Private Sector	p. 343
Regional Policy Index	p. 343
Growth and Education: Impact of a One Standard Deviation Increase in Remittances	p. 348
Growth and Institutions: Impact of a One Standard Deviation Increase in Remittances	p. 354
Growth and the Policy Environment: Growth Impact of a One Standard Deviation Increase in Remittances	p. 361
Tables
International Flows to Low- and Middle-Income Countries	p. 24
Remittances to Latin American and Caribbean Countries (US$ millions)	p. 29
Percentage of Households with Migrants by Average Years of Adult Education (16-65 Years Old) in the Household	p. 38
Education Profile of Latin American and Caribbean Migrants (Percent with a Given Educational Level)	p. 61
Regression Results for Determinants of Remittances to Latin America and the Caribbean (Ratio of Remittances to GDP, 1986-2000)	p. 83
Regression Results for Determinants of Remittances to Latin America and the Caribbean (Log of Remittances per Capita, 1986-2000)	p. 84
Regression Results for Determinants of Remittances to Latin America and Caribbean (Log of Remittances, 1986-2000)	p. 85
Income Gini Coefficient Before and After Remittances	p. 89
Poverty Head Counts Before and After Remittances	p. 91
Income Gini Coefficient in Counterfactual Scenario of No Migration	p. 95
Poverty Head Counts in Counterfactual Scenario of No Migration	p. 97
Poverty Head Counts among Recipient Households in Counterfactual Scenario of No Migration	p. 101
The Impact of Remittances on Growth and Changes in Inequality	p. 105
Poverty Elasticity of Remittances in Latin America	p. 108
Remittances and Economic Growth	p. 112
Remittances and Investment	p. 116
The Cyclical Behavior of Remittances in Latin America	p. 119
Remittances and Growth Volatility	p. 124
Volatility Effects of External and Policy Shocks by Remittances Levels	p. 126
Savings Rates by Income Quintile and Remittances Recipient Status	p. 137
Access to Remittances and Expenditure Shares	p. 142
Remittances and Expenditure Shares by Counterfactual Household Income Quintiles	p. 144
Access to Remittances and Children's Education-OLS	p. 152
Remittances and Children's Education by Mother's Education	p. 153
Remittances and Health Outcomes	p. 159
Access to Remittances and Hours Worked	p. 162
Remittances and Labor Force Participation (with Instrumental Variables)	p. 163
Remittances and Labor Force Participation, by Educational Levels (with Instrumental Variables)	p. 164
Correlations between Remittances and Indicators of Financial Development	p. 179
Panel Estimates of the Impact of Remittances on Financial Development with Interactions for Different Latin American Country Groupings	p. 182
Factors that Might Affect the Impact of Remittances on Financial Development	p. 186
Testing for Differences in the Use of Banking Services by Remittances Recipients and Nonrecipients	p. 190
Likelihood That Remittances Recipients Will Use Banking Services: Probit Estimations for El Salvador	p. 193
Likelihood That Remittances Recipients Will Use Banking Services: Fixed Effects Probit and Instrumental Variables Probit Estimations for El Salvador	p. 194
The Impact of Remittances on Bank Deposits, Branches, and Credit across Mexican Municipalities: OLS Estimations Clustered by State	p. 197
The Impact of Remittances on Bank Deposits, Branches, and Credit across Mexican Municipalities: Instrumental Variables Estimations	p. 199
Remittances and the Real Exchange Rate	p. 224
The Impact of Remittances on the Real Exchange Rate	p. 233
The Impact of Remittances on Real Exchange Rate Misalignment	p. 235
Macroeconomic Results of a Remittances Shock and a Payroll Tax for Jamaica	p. 238
List of Accounts for Jamaica SAM (2002)	p. 245
Summary Statistics of Eligible Households Surveyed in Nicaragua in 2000, 2001, and 2002	p. 261
Summary Statistics of Eligible Households Surveyed in Honduras in 2000 and 2002	p. 266
The Impact of RPS on the Incidence of Receiving at Least One of the Following Transfers: Private Food Transfer, Remittances, and Food or Money Donation from Nongovernmental Organizations	p. 268
The Impact of PRAF-II on the Incidence of Receiving at Least One of the Following Transfers: Private Food Transfer, Remittances, and Food or Money Donation from Nongovernmental Organizations	p. 270
The Impact of RPS on the Incidence of Receiving Remittances	p. 272
The Impact of PRAF-II on the Incidence of Receiving Remittances	p. 274
The Impact of RPS on the Amount of Remittances Received	p. 276
The Impact of PRAF-II on the Amount of Remittances Received	p. 278
The Impact of RPS on the Incidence of Receiving Food	p. 280
The Impact of PRAF-II on the Incidence of Receiving Food	p. 282
The Impact of PRAF-II on the Amount of Food Received	p. 284
The Impact of RPS on the Incidence of Receiving Food, Money Transfer, or Both from Nongovernmental Organizations	p. 286
The Impact of PRAF-II on the Incidence of Receiving Food, Money Transfer, or Both from Nongovernmental Organizations	p. 288
Types of Remittances Service and Accessibility Considerations	p. 311
Requirements to Open a Bank Account in the United States (March 2006)	p. 313
Remittances, Education, and Economic Growth	p. 346
Remittances, Institutions, and Economic Growth	p. 351
Remittances, the Financial Sector, and Economic Growth	p. 355
Remittances, the Policy Environment, and Economic Growth	p. 359
Remittances, Complementary Policies, and Investment	p. 363
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