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Lecture 12: Remittances or Gifts?

This lecture explores the motivations behind remittances and their potential as a substitute for Canadian aid. It discusses the different motivations for remittances, differences based on immigration status, the distribution of remittances, and their impact on household transfers and charitable remittances.

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Lecture 12: Remittances or Gifts?

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  1. Lecture 12: Remittances or Gifts? Are Remittances a substitute for Canadian Aid?

  2. Motivations • Alturism: One way • For How long and to Whom? • Implicit Contract: • For how long and to whom? • Combination of both • Does motivation differ by Immigration Status? • Temporary vs. Permanet

  3. Canadian Case • Why so little: • Less than 6% of total HH expenditures • Less than 1/3 of foreign-born remit • Largest Remittances by older vintage of immigrants • What do remittances look like over life cycle? • What is split between household and Charitable Remittances?

  4. Distribution of Remittances

  5. Table 3: Expenditure Elasticities for Remittances to Persons Calculated from LA/AIDS, 1992/1996 Notes: Elasticity is computed through the formula , where is the actual mean expenditure share and is the estimated household income coefficient.

  6. Household Transfers

  7. Charitable Remittances

  8. What is done with Remittances? • Household consumption • Who gets: poorest or middle class • Is it invested: Schooling, capital equipment • Two for One Mexico Programme • Mexican Heroes to Mexican Exploited. • Are remittances a substitute for Aid or FDI?

  9. Canadian Aid • Size of Aid Programme • 2004-05 ODA/GNI=.32 or $ 14.4 billions • What is UN goal? ODA/GNI=1% • What countries achieved above? • Composition of Aid Programme • ODA= Official Development Assistance • ODA is • concessional in nature, provided by official government bodies for development purposes

  10. Canadian Aid • What is Case for Aid? • Humanitarian and economic • What percent of Canadian aid Humanitarian • Disaster relief, Vitamin A, HIV-AID • What percent of Canadian is for economic development ? • Industrial Aid, foreign student training, good governance • Who should get Aid ? • Should it be distributed by need or by level of development? • Should it be distributed through multi-national bodies ? • Harder Case

  11. Canadian Aid • Economic Case: • Foreign Exchange gap: Is difference between the following: • Id+If < Sd+Sf • where Sd= domestic savings in local currency • Where Sf = Savings held in foreign hard curreny • Where Id = Investment component financed domestically • Where Id = Investment component must be financed with hard currency

  12. Canadian Debate • Debate 1: Canada versus the Poor World • Be it resolved that Canada suspend its Aid programme and replace it with free trade in all products from your country and unlimited immigration from your country. • Two teams: 3 players each.. Winner receives 4 bonus points, Second Place 2 points. • Team A: Consists of only Canadians and represents Canada’s interests • Team B: Consists of only representatives of Xenandu a typical underdeveloped country

  13. Debate: Who should get Aid • Class Assignment #3 • Due Week of October 30th in your Tutorial • You have been asked by your boss, Mr. Peter Harder who heads Canada's aid programme (CIDA) to outline an argument to justify why your country is deserving of a portion of Canada's $100 billion aid package. Using one economic, social, demographic indicator outline a case for your country. The basic components in this argument are; • A clear description, which outlines why your country is poor, but deserving. This would involve use of one economic, social and demographic indicator shown in the movie but also a discussion to demonstrate what positive features of your country, good gov't, health indicators, exports, education, or low population growth that indicates a capacity to use the aid. State exactly what the indicators are; for example health would be life expectancy, infant mortality rate, etc. • Outline what specific forms of aid to alleviate what are the weak points of your economy as noted in your indicators. For example, my country has a high infant mortality rate; this would imply that it is poor but that health aid could alleviate this problem. Use at least four types of aid: education, health, agricultural, policing, water, resource conservation, etc. to illustrate your country's specific needs. • Once you establish what type of aid is required, explain the connection between this form of aid and your country's future prospects of development. • Conclusion: Tie together your indicators, your country's plight and a full description of the aid package in the final paragraph and make a recommendation to Peter Harder. The recommendation is for a specific form of aid, for a specific period of time and for a specific amount • Use 500 word maximum.

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