Labor votes with its feet-individuals migrate from areas of low wages to areas of higher wages. That has been the traditional view, one that has spawned much policy advice to control migration and to affect the location decisions of migrant laborers. But recent research indicates that portfolio investment theory might hold the key to understanding why people migrate in developing economies and how and why they remit their earnings. Under this theory, migration decisions are ordered by family needs for stable income levels, provided by a diversified portfolio of laborers, both male and female, and the need to jointly insure the family's well-being. In brief, group decisionmaking and objectives, rather than the wishes of individual migrants, determine migration patterns and remittance flows. This article, based on recent and earlier research by the author and his colleagues, attempts to explain migrant behavior in light of portfolio investment theory applied to field studies conducted in different parts of the world (see box on research). The results of the studies suggest a re-evaluation of policy approaches to migration and remittance issues.

Migration in LDCs: Risk, Remittances, and the Family

There is growing recognition that when a household member migrates, there is a complex range of social as well as economic consequences for the everyday lives of those who remain in the origin household. This paper examines the children left behind phenomenon in Tajikistan, a country with very high rates of international labour migration. With the use of data from the Tajikistan 2007 Living Standards Survey, logistic regression modelling is applied to examine the impact of fathers', mothers', siblings', and other household members' migration on the school enrolment of secondary school-aged children. The results show that there is a significant positive association between longer-term parental migration and children's enrolment, whereas the long-term migration of siblings sending remittances and the mid-term migration of ‘other household members’ (not parents or siblings) are both significantly negatively associated with children's enrolment. The findings highlight the importance of considering differences between children left behind.

Household Members' Migration and the Education of Children ‘Left Behind’: Empirical Findings from Tajikistan and Reflections for Research Practice

We estimate a multinomial logit model to explain the choice of transfer channel (formal services vs. informal operators or personal transfers) by 1139 pairs of migrants and recipients of remittances in Moldova in 2006. Explanatory variables include socioeconomic characteristics of the migrant and other household members, the pattern of migration (destination country, legal status, duration) and financial information (average amount and frequency of payments). Key reasons not to use a formal transfer channel include an emphasis on low transfer cost (rather than speed, convenience, or security), a migrant’s irregular legal status in the host country, and short migration spells.

http://collections.unu.edu/eserv/UNU:938/wp2009-002.pdf

What determines the choice of transfer channel for migrant remittances? The case of Moldova

Migrant remittances, particularly when transferred through the banking system, may contribute to financial development in migrants' home countries. We analyse the determinants of the choice of transfer channel (formal services versus informal operators or personal transfers) by Moldovan migrants in 2006. We estimate a multinomial logit model from household survey data. Our explanatory variables include socio-economic characteristics of the migrant and other household members, the pattern of migration (destination country, legal status, duration), and financial information (average amount and frequency of payments). Key reasons not to use a formal transfer channel are a migrant's emphasis on low transfer cost (rather than speed, convenience or security), irregular legal status in the host country, and short migration spells. Our findings demonstrate that migrants' transnational capacities and activities in their entirety bear upon the choice of transfer channel; any policy interventions to promote the use of formal channels should reflect this.

Migrant transnationalism and the choice of transfer channels for remittances: the case of Moldova

In recent years, migration has increased rapidly and become a more prominent feature of the world economy and the public policy debate. According to the United Nations, there are estimated to be more than 200 million international migrants in 2010. Remittances, the money that the migrants send back to their home countries, reached an estimated $328 billion in 2008. This dissertation primarily focuses on processes and consequences of economic migration and more specifically of remittance sending/receiving. This dissertation focuses on the determinants of migration that prompt economic migrants to leave their countries of origin, on how remittances are currently empirically measured and on how migrants send remittances once they have decided to do so. Research was also done on the effect immigrant integration had on the remittance channel decision and on health care spending in the sending country.

Money and mobility : migration and remittances

In many developing countries, the formal financial sector is underdeveloped and majority of the population does not have access to it. This paper analyzes the empirical link between remittances and financial sector development on a microeconomic level. Using a unique household dataset for Moldova, we find that receiving monetary remittances has a positive and significant effect on the probability of having a bank account, thereby promoting financial sector development. Furthermore, we show that remittances tend to have an even higher positive effect on household savings, which is a sign for a hidden potential for financial sector development.

https://www.econstor.eu/bitstream/10419/27025/1/582142652.PDF

Eva Schlarb

Papers

Bank accounts and savings - the impact of remittances and migration: a case study of Moldova