On the other hand, they find negative associations between education, housing costs and refugee status in Canada Chowdhury and Das, c. Importantly, remittance behaviour depends on the type of immigrant who enters each country. While Canada is known for its points-based system, there is also a family reunification category and these two classes may result in differing determinants of remittances.
On the one hand, the points-based immigration policy attracts high-skilled immigrants who tend to have longer migration durations and may become less connected to their families back home over time. Meanwhile, the family-based preference system, similar to the one used in the U. Canadian researchers have found heterogeneity in remittances according to country of origin and immigration classification. African immigrants were found to send more funds if they were refugees, younger and part of a social organization that sponsored family members Loxley et al.
According to Chowdhury and Das d , Chinese immigrants tend to arrive independently and be categorized as economic class, while Indian immigrants are sponsored by their families and classified as family class. When examining remittances across these two groups, they find that more educated immigrants are less likely to remit in both groups, but there are positive associations between income and remittances. Family-class migrants are more likely to send money than their economic-class counterparts.
Home-ownership costs in Canada reduce the likelihood of remitting for all categories of migrants. For Chinese immigrants, gender affects remittance behaviour but marital status does not; in addition, younger Chinese immigrants are more likely to send money back home. Importantly for policy proposals, Chinese immigrants are more likely to send money if they already have savings back home.
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However, there are important differences for Indian immigrants, according to Chowdhury and Das e. Married Indian immigrants are more likely to send money back to India. Also, having immediate and extended family in Canada boosts the chances of remitting back to India. This may occur through the influence of role models and peers who already donate funds back home through established organizations in Canada and India Durlauf and Fafchamps, Micro-level studies in select countries such as Mexico, Ecuador and Nepal have found positive links between remittances and health-care usage and outcomes.
Skills Training and Workforce Development with Reference to Underemployment and Migration
For Mexico, Amuedo-Dorantes and Pozo find that government spending on the PROGRESA public health-care program substitutes for private spending, and remittance spending on health care is concentrated at the upper income levels. For Nepal, Chezum, Bansak and Giri do not find that government programs can adequately cover health-care needs, so remittances fill in the gaps. Specifically, the authors find a positive link between remittances and health-care spending in Nepal, particularly at the lower end of the income distribution.
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For Ecuador, Ponce et al. Thus, remittances from Canada are likely having positive effects on health outcomes for recipient households. One of the tangible benefits of remittances at the household level is financing education expenditures. However, the impacts of remittances on education spending and outcomes are not clear. If a household facing budget and credit constraints wants to invest more in education, additional income from remittances should increase its investment, as found in Adams and Cuecuecha , in Ghana and Guatemala.
Hines and Simpson find a positive relationship between remittances and household expenditures on education in Kenya. Alternatively, remittances may increase the consumption of food and durable goods but may not change investment decisions such as education. For Mexico, there is no clear linkage between increased remittances and increased spending on tuition and books Airola, While poor households are likely to spend more on food and durable goods, wealthier households can afford to invest in the future via physical or human capital.
Even more complicated is to calculate out the total long-run effects of remittances on educational outcomes, as it takes time for these effects to be realized. For Mexico, some studies find increased educational attainment and better grades, while others find a disincentive to attend college as labour migration to the U. For example, Acosta finds that young children are more likely to be in school in El Salvadoran households that receive remittances. In Nepal, remittances lead to a higher propensity of being enrolled in school, with the largest effects on boys Bansak and Chezum, Mansour et al.
The resulting investment in human capital will ultimately boost individual productivity, wages, happiness and well-being, although these outcomes are difficult to quantify at the household level across generations. Thus, it is plausible that remittances from Canada are having small, positive effects on educational outcomes for some recipient households.
Last, remittances can lead to financial access and increased investments in the migrant-sending countries. Evidence from Mexican household data suggests that this is the case. Using data from the Mexican Family Life Survey for and , Ambrosius finds that remittances are highly correlated with savings accounts and other borrowing options in Mexico. It is likely that remittances from Canada provide better access and use of financial services in Canada. In this section, we discuss the various macroeconomic impacts of remittances.
We consider the effects on economic growth, development and poverty alleviation in the receiving country. We then analyze the extent to which remittances impact sending countries such as Canada and the U.
Given the scale of worldwide remittances, their impacts can be significant for receiving countries, particularly for small economies where they can represent a significant share of GDP. Even in larger economies, remittances have been shown to play an integral part of economic growth, development and poverty alleviation. In standard models of economic growth, total output or GDP can grow due to increases in labour, physical capital or productivity. Remittances are akin to capital flows, so that countries that receive them have access to more capital that may fuel economic growth.
Remittances may lead to entrepreneurial pursuits, boosting productivity through information diffusion or increasing investment. As discussed above, remittances may be used to invest in education or human capital. An increase in schooling investment within a country will increase worker productivity over the long run, leading to more economic growth. However, remittances may be used to buffer household income, which could create a disincentive to work among other household members. If this occurs, it is plausible that an inflow of remittances may dampen economic growth, leaving the ultimate question an empirical one.
Remittances impact the macroeconomic situation of a receiving country through other channels. For example, an influx of remittances may put pressure on the local currency, causing it to appreciate in value. While a stronger currency is good in terms of attracting foreign capital, appreciation will reduce exports, causing a reduction in total output GDP.
For many developing countries, however, remittances are an important source of foreign exchange and can alleviate balance-of-trade deficits by financing imports. Households that receive remittances have higher income levels and will thereby spend more money on local goods and services.
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Increased household consumption leads to increases in aggregate demand which puts upward pressure on prices. Studies find that remittances lead to higher inflation in Latin American countries Ball et al. Higher incomes lead to more sales and income tax revenues which may be used to finance government spending on education, infrastructure, etc.
If remittances are taxed, they can have a direct impact on government budgets. A few countries have tried to tax remittances directly, but with little success. Other countries impose indirect taxes on remittances by artificially setting the exchange rate on them so that revenues are generated when the funds are converted to the local currency.
Ethiopia, Pakistan and Venezuela have implemented this type of policy on remittance inflows. Since remittances often lead to positive effects on total output or income, they can be a force in poverty alleviation in the receiving country. Adams and Page document sizable effects from remittances in a sample of more than 70 developing countries: they estimate that a 10 per cent increase in remittances results in a 3. Remittances can also be an important source of funds to meet subsistence needs. Analysis of detailed household surveys from around the world suggests that remittances are often spent on necessities such as food, clothing, health care, transportation and housing, rather than luxury items.
Overall, the evidence on the growth effects of remittances for receiving countries is mixed.
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As noted above, remittances affect economic growth through various channels, making it difficult to tease out direct effects. Results depend on the time being studied and the specific host and source country combinations as well as economic conditions Chami et al.
In a very recent study of remittances and growth, Clemens and McKenzie posit that many complicating factors make it difficult to find a positive link between remittances and economic growth. Thus, the Canadian government should closely monitor the macroeconomic situation of recipient countries so that it can better understand the impacts of remittance flows. In some cases, remittances are being used to meet basic needs, while in other cases, they may be crowding out other forms of investment, which may be detrimental to local economies. The Canadian government could collaborate with local governments to better understand how the funds from abroad are being used.
Empirical evidence of the macroeconomic impacts of remittances on remittance-sending countries is mixed and depends on the size and level of development of the country receiving sizable migrant populations. In many cases such as Canada and the U. For less-developed countries with large migrant populations such as Indonesia or Thailand , the outflow of remittances can have larger effects as the size of the remittances make up a significant share of GDP.
Some studies have found a positive relationship between remittances and macroeconomic factors Gapen et al. Remittances may reduce domestic savings, hurt domestic investment and ultimately weaken the domestic capital stock significantly. Domestic consumption may also fall in these countries if the funds leaving the country are large enough to noticeably lower aggregate demand and output.
In turn, the distribution of wealth in the sending country may be altered and inequality may rise because of an outflow of remittances. If migrants send over half of their income back to their home countries and live off the remaining funds, those remaining funds may be inadequate and unsustainable in the long run. If migrants intend to return home, they may also be reluctant to invest in their host country and they could create pockets of poverty in neighbourhoods where they temporarily reside.
Recent work by William Olney a suggests that remittance outflows can lower the wages of native workers. This can be seen through a reduction in demand for labour in non-traded domestic goods and services markets. If the remittance flows result in lower demand for certain locally produced goods and services, demand for labour to produce these items may fall. Using German data, Olney b finds that a one per cent increase in remittances lowers native wages by 0.
Similar studies could be conducted to see if these effects are happening in Asian countries that are large recipients of Canadian remittances. For large developed countries with significant levels of remittance outflows, most of the effects are more likely to be indirect. For example, if current migrant populations are sending large amounts of remittances home, at least some of that money is being used to finance the migration of other household members.
In the U. Whether these effects — funding for new migrants and chain migration — are net costs or benefits to the host country depends on the characteristics of the migrant. This channel is particularly relevant in the U. In general, however, very little is known about the impact of remittance outflows for the migrant-receiving and remittance-sending country. As the above discussion suggests, having a particular framework with which to assess the flow of funds from a migrant to a household in the source country facilitates a better understanding of the impact of the transfers on economic outcomes such as consumption, investment and growth, and can help inform government policy in both the sending and receiving countries.
Overall, the literature does not indicate that remittances have large effects on the macroeconomic situation of receiving or sending countries. Those that receive remittances appear to benefit and those that send them do not appear to be sizably adversely affected.