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August 18, 2014

Migration, Remittances, Income, The World Bank...and Legos

By Timothy Ogden

We write a good deal about remittances because they are a big part of the financial lives of many poor households—on the sending and receiving end. Remittances receive a lot of attention in aggregate because so much money is flowing: a reasonable estimate is that more than $600 billion is moving annually and that the vast majority of that is flowing to poor households. On Friday, I spoke with The New York Times' editorial board about some of the macro challenges of remittance systems and the role that the World Bank could play in alleviating the costs and burdens of anti-money laundering regulations. I believe there is a useful role for the World Bank and the other development banks to play in lowering the costs of remittances, and that role fits well within the banks anti-poverty missions.

But remittances are not just a macro-level phenomena. Global flows are made up of billions of small transactions and there is a lot less attention to how remittances work at a micro-level. Bringing greater attention to these micro-level questions is one of the reasons that Michael Clemens of CGD and I wrote a paper proposing a new research agenda on remittances founded on the idea that migration is a household financial management strategy. The questions about remittances that get the most attention are somewhat misguided because they are not grounded in the household realities that drive them.

Take for instance the oft-heard question of how remittances can be a tool for development. That’s the wrong question to be asking. To explain why, we created this video.


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