Please direct your attention to this excellent post on the economics of remittances by YouNotSneaky! (for my money far and away the best anonymous econblogger):
But what about the argument that remittances are all biscuits and gravy with tiny bits of sausage in it? Welllll, no. Sort of. I mean, yes, but, let’s think about things more carefully here.
Exactly. But more technically…
Bottom line is that most of the so called “gains from remittances” are straight up gains from IMMIGRATION. Or in other words, they are gains from the fact that some person from a poor household in a poor county has managed to make their way to a rich country and now has a richer income. Strictly speaking the gain from remittances is just the gain from INTER-HOUSEHOLD reallocation of income between the migrant and those who stay behind, not the overall increase in household income due to migration.
A bunch of illuminating graphs intervene and then:
All that basically means that the observed benefits from remittances that people rave so much about are mostly just straight up benefits from LABOR MIGRATION. Which are huge, but somehow that just isn’t being said.
It is interesting that people fix on the humanitarian effect of migrants sending money back home. The immigrant, prior to migration, was presumably just about as poor as the people he or she is sending money home to. So if it’s so good for those people to get that money, then it was just as good for the migrant to make it in the first place. But I’m just saying the same thing.
There’s a lot more, all of it interesting.
[Hat tip: Ambrosini.]