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Challenges to sending money back home

Altruism and workers' remittances: evidence from selected countries in the Middle East and Central Asia

The role of family loyalty and hardship in migrant remittance flows

Authors: J. Bouhga-Hagbe
Publisher: International Monetary Fund , 2006

Full text of document

Workers’ remittances have been playing an increasingly important role in the balance of payments of many countries and can significantly contribute to the strength of their external positions. Assessing the likely stability of remittance flows could be a valuable input to the analysis of their external vulnerabilities. This paper argues that “altruism” - the willingness of a worker living outside his or her home country, to provide financial assistance to another in a situation of “hardship”, as a motive to send money home, would contribute to the stability of these flows. Using a simple framework that relates workers’ remittances to agricultural GDP, which is used as an indicator of economic “hardship” in the home country, evidence suggests that altruism could have played an important role in the flow of remittances to Egypt, Jordan, Morocco, Pakistan, and Tunisia in recent years.

Some of the other motivations for sending remittances home are:

  • a desire for migrants to to build “something in their homeland, investing in real estate or creating a small business
  • a desire to to diversify their portfolios
  • facility in sending money home, because of streamlined streamline administrative procedures related to their transactions with the home country

The paper concludes that:

  • remittances tend to be negatively correlated with agricultural GDP, which is used as an indicator of “hardship”
  • a sudden drop or reversal of remittance flows to the countries we consider is unlikely in a foreseeable future, as many of those who are receiving this assistance will likely continue to depend on it in the coming years
  • the authors were not able to clearly quantify the relative importance of altruistic motives compared to other motives. They conclude that the fact that the trend, which captures other potential motives to remit was significant in our estimates suggests that other motives to remit could also be important, but that this is left for further research