Economic Effects of Remittances on Immigrant and Non-Immigrant Households

Abstract

An approximate $297 US billion in officially recorded remittances was sent by immigrants or migrants to family members in countries of origin according to World Bank data in 2005.¹ Recently, such institutions, alongside nation-states, are paying attention to various “poverty-reducing” aspects of remittances: characteristics (e.g. educational attainment) of senders and receivers, positive changes in the living standards of receiving households, etc.² Individual countries (such as the Philippines) carefully track sending/ receiving habits of im/migrants and are particularly interested to compare official and unofficial (i.e. “illegal”) methods of sending money in order to direct more unofficial remittances through legal channels. Some researchers note that remittances have been the crucial source of foreign exchange allowing the Philippines to avert a balance of payments crisis despite a persistent trade deficit.³ Central American countries are also eager to coordinate remittances with state spending on local infrastructural projects, with Mexico designing extensive federal, state, and local programs. Competition between services used to send and receive remittances has also intensified since the mid-90s, resulting in a significant decline in remittance fees (Orozco 2006). This competition is noteworthy in that the US government (in the form of the US Post Office) has emerged as a cheap competitor of remittance services for both documented and undocumented im/migrants, beating out private capitalism in the forms of Western Union and Moneygram.