Accounting for global migrant remittances flows

ABSTRACT

Migrant remittances are important to some countries. According to the World Bank, they comprise more than 30% of the GDP of Kyrgyzstan, Tonga, Tajikistan, Haiti and Nepal. Compared to official development aid or foreign direct investment, remittances have lately become a prime income stream for less-developed nations. In this paper, we analyze the net spillover and feedback effects from the consumer demand generated in migrants’ home countries. We use World Bank estimates of remittances and the World Input-Output Database (WIOD) for the investigation with so-called ‘hypothetical insertion’ as the tool of choice. We find that even some developed nations, like the US, likely benefit from remittances (the largest global path for remittances is that from the US to Mexico), but that not all do (e.g. Canada does not). We stop short of making strong policy recommendations. Instead, we suggest that more attention is paid to the veracity of remittance estimates.

KEYWORDS:

• Migrant remittances
• input-output
• global value chain
• international migration
• interdependencies

Disclosure statement

No potential conflict of interest was reported by the authors.

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

1 An exception to this usual procedure is mostly commonly found in IO models devoted to the study of regional and urban areas and which commuting flows are included (Ferreira et al., 2018).

2 The GVA is the measure of the value of goods and services produced in an area, industry or sector of an economy. GVA plus taxes less subsidies equals the gross domestic product.

3 Despite methods established as a common approach to estimate migrant remittances the OECD and IMF warns that remittances data per country have serious limitations, so that remittance estimates should be interpreted with some degree of caution. For more, please see Taylor (1999), Daianu (2001) and Ratha (2003).

4 According to Ratha and Shaw (2007), this proxy poses some difficulties because some migrants move to countries with lower per capita income than the origin country. It is unlikely that migrants residing in lower-income countries transfer funds to family members in high-income countries on the scales suggested by World Bank estimates.

5 WIOD socio-economic accounts do not contain information concerning the ‘Rest of the World’ economy. As the ‘Rest of the World’ is central to this analysis, our model displays ‘GVA’ (the sum of labor income and other GVA components) where $\mathit{\Lambda }$ and ${\mathit{\lambda }}^{\mathit{q}}$ appear in Figure 3. So, it is assumed, due to the absence of more information, that all the GVA is distributed intranationally.

6 The exception is Taiwan that has no migrant remittances official records in the World Bank database. So, specifically for this work the Taiwan economy was merged with the Rest of the World economy.

7 The M matrix is available as supplementary online data in a spreadsheet file.

8 This is different of Adams and Cuecuecha (2010) or Bang et al. (2016) definition of endogeneity. In these two landmark works on remittances studies, endogeneity is associated with how remittances or differential access to migration affect the consumption structure of distinct types of households. In our case, this information is not available for all the economies and national households are treated as a whole. Nevertheless, remittances affect the amount of income available to households in each economy and therefore their consumption level.

9 The four tables compiling our results are available upon request and have been submitted as supplementary data.

10 ‘Such discrepancies arise because of differences in definition and reporting time’ (World Bank, 2016, p. xv). For example, ‘some countries compile data based on citizenship of the migrant worker rather than their residency status. Further, data are shown entirely as either compensation of employees or personal transfers, although they should be split between the two categories if the [IMF] guidelines were correctly followed’ (World Bank, 2016, p. xvii).

11 We would like to acknowledge the important contribution of the anonymous referees to the inclusion of new suggestions and ideas for future work.