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Accounting for Migration and Remittance Effects

Accounting for Migration and Remittance Effects. Susan Pozo Prepared for Conference on Regional Trade Agreements, Migration and Remittances with Special Focus on CAFTA and Latin America Sam Houston State University April 12, 2008.

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Accounting for Migration and Remittance Effects

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  1. Accounting for Migration and Remittance Effects Susan Pozo Prepared for Conference on Regional Trade Agreements, Migration and Remittances with Special Focus on CAFTA and Latin America Sam Houston State University April 12, 2008

  2. Much more attention paid to the migratory process in the past 5 years

  3. 1. Is this a research fad? Source: Econ Lit database, 2008

  4. Growth in the number of persons affected by the migratory process? Source: U.S. Bureau of the Census, 2008

  5. Source: Data from UN (2008)

  6. Source: Data from UN (2008)

  7. Remittances to Mexico (quarterly frequency, in millions of US dollars) Source: Data from Banco Central de Mexico, 2008

  8. Remittances to Mexico (yearly frequency, Percent of GDP) Source: World Development Indicators, 2008

  9. Remittances to Italy as a percent of Italian GDP (1880-1910) Source: Computed by the author with data fromCinel (1991) and from Flandreau & Zumer (2004)

  10. Increased dispersion of the foreign born? 1990 2006 Source: US Census Bureau, http://factfinder.census.gov

  11. Computed by the author from Census Bureau

  12. Computed by the author from Census Bureau

  13. Computed by the author from Census Bureau

  14. 1990 2006 Increased spread of the foreign-born in 2006 relative to 1990

  15. 3. Increased dispersion of the foreign-born? Source: Computed by author from 1990, 2000 Decennial Censuses and 2006 American Community Survey, US Census.

  16. Economic Development Effects of the Migratory Process on

  17. Tend to focus on only one facet of the migratory process… Poverty -- remittances Labor force participation – remittances Education—remittances Business Investment—(return) migration Health – emigration Happiness - migration

  18. Economic Development Effects of the Migratory Process on

  19. Migrant HH and Remittance Receipt Source: Amuedo-Dorantes, Georges and Pozo, (2007)

  20. Source: Computed by author from LAMP and MMP databases

  21. Too large Too small Computed by the author from : Discrimination and Economic Outcomes Survey Database, IADB, 2006

  22. We miss out on the story when we focus on one or the other alone In the modeling of education a typical strategy might be to estimate: Education = βRemit +δX +Є Several problems: i) endogeneity due to reverse causality ii) endogeneity due to omitted variable bias

  23. Source: Amuedo-Dorantes, Georges and Pozo, (2007)

  24. Typical solution Instrument for remittances: Using migration or variables linked to long-standing migratory patterns, such as the mapping of railroads. Essentially migration networks.

  25. Problems with this Approach… 1. An instrument can’t be something that should be in the equation in the first place, i.e. migration and variables proxying for long-standing migratory patterns are likely to impact educational attainment via: • A disruptive effect, in the case of family migration • A network effect, in the case of both family and broadly defined migration networks

  26. Migration capital/networks Expected value of additional education varies with the probability of future migration EVH = (pH) RH,H + ( 1 - pH) RH,US

  27. Problems with this Approach… 1. An instrument can’t be something that should be in the equation in the first place, i.e. migration and variables proxying for long-standing migratory patterns are likely to impact educational attainment via: • A disruptive effect, in the case of family migration • A network effect, in the case of both family and broadly defined migration networks 2. We notice significant differences in selectivity with respect to different types of HHs. HHs without migrants receiving remittances are very different from HHs with migrants receiving remittances.

  28. Conclusions 1. Redesign of surveys to take into account the diversity in the incidence of migration and remittances. 2. Redesign of econometric methodology to recognize differential “migration,” “remittance” and “migration capital” effects.

  29. Source: Amuedo-Dorantes, Georges and Pozo, (2007)

  30. Sources: Population Division of the Department of Economic and Social Affairs of the United Nations Secretariat, Trends in Total Migrant Stock: The 2005 Revision http://esa.un.org/migration, Saturday, April 05, 2008; 8:31:39 AM. Marc Flandreau and FrédréricZumer,The Making of Global Finance, 1880-1913, OECD 2004. (Italian GDP data) Cinel, Dino, “The national integration of Italian return migration, 1870-1929. Cambridge, Cambridge University Press, 1991.

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