ABSTRACT
International remittances are defined as the money sent home by immigrants. Officially (in recording of statistics), however, remittances are defined as the sum of two components: money sent home by immigrants and all types of compensation of employees (wages, salaries, benefits) which include seasonal or temporary workers as well as other non-resident workers (such as local staff of embassies). Since remittances are generated mostly by the first category, an analysis of remittances should incorporate history of immigration all over the world. However, before we look into immigration, we should first ask ourselves whether the study of international remittances has any significance for the global economy. To help us to respond to that issue, I first focus on a few facts about international remittances that make the study of evolution of remittance payments, their trends, their use and effects important for the economic performance of certain regions of the world (and thus for the global economy). In 1980, 2.1% of the world’s population was living outside their country of birth and they were sending billions of dollars (roughly $44 billion) to their home country. That ratio has increased to 3.1% in 2010 and immigrants are sending almost $422 billion to their families back home (see Figures 1.4-1.8 at the end of this chapter for some detailed information about world immigrants and international remittance payments). For many remittance receiving countries, the remittance receipts make up a good percentage of the national income of the country. The countries, for which remittance receipts make up a good share of total inflow of foreign funds and also of export earnings, use the remittances to deal with the balance of payment deficits. These are observed in-spite of the fact that the official statistics available for international remittance payments are underreported (this underreporting results because immigrants for various reasons use unofficial channels to send remittances). Thus, existing studies of international remittances agree that further investigation of these facts would provide us with more information and help formulation of policy structure for the growth of the global economy. In the next few paragraphs, I will look into a brief history of world migration and remittances and point out some of their notable characteristics. History of immigration notes that from the end of the nineteenth century up to the middle of the twentieth century the world experienced an era of immigration
restriction that was flanked by two periods of unrestricted immigration in the sense that immigration was encouraged, financed or subsidized during these periods. The first of these two periods, from the latter half of the nineteenth century till the onset of WWI, is referred to as an era of mass migration and the second one, from the period following WWII and till the onset of the twenty-first century, is called restricted mass migration. This international mobility of people was shaped by political events, economic incidents and structural changes in the world economy. Innovation or invention, technological and scientific progress in communication, transportation methods and the process of production also contributed to this mass migration (Daniels and Graham, 2001). The initiation of movement of workers across national borders is marked by indentured labor or the slave trade. This form of forced migration is not expected to generate remittance payments and historians didn’t mention any remittance payments in the period when the slave trade was the main tool for the international mobility of workers. The ending of the slave trade, emancipation of slaves in the US and emancipation of British colonies ended this forced migration (mid-nineteenth century). This was followed by migration of mainly family groups of specialized workers like farmers, craftsmen and artisans and these migrants didn’t leave anyone behind to send remittances. Gradually the characteristics of migrants changed. They became young single individuals, mostly males, who didn’t have strong ties with their homeland. Thus, these migrants didn’t raise questions about remittance payments (Hutton and Williamson, 1994). The post-WWII world saw an increase in migration following the wage growth and narrowing income distribution (see Table 1.1). In the 1960s immigration policies changed in Canada, the US and Oceania which reduced emigration from Europe and increased emigration from Asia. Migration within Europe (intra-European migration) also increased. Emigrants from India, Pakistan, China, Korea and the Philippines went to Western Europe, Southern Europe and the US. Europe also started receiving immigrants from the Middle East and the
northern parts of Africa. Although, due to the geographic proximity, it is possible that immigrants from the Middle Eastern and African countries may have sent some forms of financial help to their families back home, the absence of consistent and established record keeping does not allow us to follow the trend or growth of remittances for this region during the 1960s. However, in the 1970s following a series of economic events (such as slowing down of wage growth, widening of income distribution and the oil crisis of 1974) we saw the tightening of immigration policy. Anti-immigration sentiment was rising all over the world and issues related to illegal immigration started receiving attention. In-spite of that, the immigrant population was quite huge compared to the pre WWII situation (about seventy-two million). It is important to note that European countries were the source for intercontinental migration before WWII and migrants’ destinations were the US, Canada and Latin American countries. Mexico and Latin America turned out to be the source countries after 1970. Since many of these Mexican and Latin American migrants moved to the US during this period of time, we expect an outflow of remittances from the US during this period. What was more significant around this time is that the US shifted its quota restriction in favor of Asian countries and restricted the flow of immigrants from North Western European countries. The breakdown of family ties that was observed in the period preceding WWI was reversed. This hints towards the possibility of remittance payments. Data from International Monetary Fund show that from 1980 onwards there was more regularity in recording remittances. In the late 1980s, following the political turbulence in Eastern Europe and in Central Asia, there was an increase in workers’ mobility within Europe. IntraEurope migration together with the flow of refugees from the countries with political turmoil made the size of migration larger than the migration to North America and Oceania. Although a reversing of trend started around the late 1970s, it was around the 1990s that Europe turned from a source country for migration to a destination country. In addition to the flow of workers from the eastern part of Europe, migrants from Asia, Middle East and Africa comprised a higher proportion of total population in Europe compared to that in the 1970s and 1980s. The guest workers’ provision also added to this volume. In addition, the flow of illegal migration increased also at that time. In the US the Immigration Reform and Control Act of 1986 turned many illegal immigrants into resident aliens and/or documented migrants. In the 1990s, the US economy was booming fueled by the dotcom era’s success. Faced with a growing economy, innovation and inventions, immigrants felt more comfortable; their receipts or returns from their jobs increased and that may have resulted in a higher volume of remittance payments. Due to more even integration of global capital and goods market compared to that in the world labor market (Chiswick and Hatton, 2002) and also due to not so effective national policies towards immigration, legal and illegal migration would continue in the coming decades. Since the main force behind such migration is economic opportunity in the high income countries and not enough rapid
progress in the developing countries, the remittance transfers would always be expected to be significant in the world integration. With this brief account (as described above) of the global migration scenario, I will turn to some basic facts about international remittance payments. My plan is to give an overview of world remittance flows (which will be presented with further details in the separate chapters). In Figure 1.2 we show total world inflow of remittances from 1980 to 2009. The total world remittance payments increased from $3.32 billion in 1970 to $43.23 billion in 1980. Throughout the 1980s the figures kept on increasing. Remittance transfers, in general, show an increasing trend; however, the rate of growth has been the highest during the last decade. Even when we look at remittance inflow by different regions such as East Asia & Pacific, Europe & Central Asia, Latin America & Caribbean, Middle East & North Africa, South Asia and Sub-Saharan Africa, total remittances show an increasing trend between the 1980s and the 2010s (Figure 1.3).
