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Impact of remittances on growth and poverty

Geoff Riley

18th July 2018

The recent surge in remittances from migrant workers to their native countries may be overestimated, according to research by Michael Clemens and David McKenzie, published in the Economic Journal.

Their study suggests that the true increase in remittances may be too small for it to have detectable growth effects back home. What's more, any growth effect of remittances may be offset by the ‘opportunity cost’ – the fact that to get that money, workers have to leave.

These findings do not undermine the strong evidence that migration and remittances have notable effects on reducing poverty for migrant workers and their families. But they do help to explain why countries with big shares of the apparent worldwide surge in remittances have not achieved substantially higher growth. The researchers conclude:

‘Migration and remittances appear to expand greatly the economic possibilities of families without harming – but also without greatly helping – the economic possibilities of the broader economies from which they depart.’

Geoff Riley

Geoff Riley FRSA has been teaching Economics for over thirty years. He has over twenty years experience as Head of Economics at leading schools. He writes extensively and is a contributor and presenter on CPD conferences in the UK and overseas.

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