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Friday, May 31, 2013

Remittances as THE Cash Transfer Program of all Programs

While the internet is abuzz with articles like this, hailing cash transfers as the radical new (or maybe not-so-new) way to do development, I am surprised nobody has yet pointed out how remittances already serve as THE cash transfer program of all programs. 250 million migrant workers are poised to send a gasp-inducing $500 billion this year to their home countries, up from $410 billion in 2012 according to IFAD. The same features that experts like about direct cash transfers are already embodied by these remittances:

1. They go directly to the hands of people who need them. Yup, no middle men here.

2. Migrant households are already the ones who need the cash the most by selection into migration (otherwise, why would they leave their families behind?). By default, remittances are properly targeted.

3. Remittances have been shown to improve household well-being and to encourage productive investments. (See for instance Yang 2008, Adams 2010, and Cox-Edwards and Ureta 2003)

4. In addition and presumably better than cash transfers, remittances serve as insurance, rising in the wake of negative shocks for households in the home country (Yang and Choi 2007).

Perhaps we should think more about this as we discuss immigration reform. How can we increase remittances and enhance their benefits? Policy-makers can do better by rallying around leveraging this already existing cash transfer program, which is the largest in the world.