Remittances

by Will Wilkinson on June 2, 2008

Please direct your attention to this excellent post on the economics of remittances by YouNotSneaky! (for my money far and away the best anonymous econblogger):

But what about the argument that remittances are all biscuits and gravy with tiny bits of sausage in it? Welllll, no. Sort of. I mean, yes, but, let’s think about things more carefully here.

Exactly. But more technically…

Bottom line is that most of the so called “gains from remittances” are straight up gains from IMMIGRATION. Or in other words, they are gains from the fact that some person from a poor household in a poor county has managed to make their way to a rich country and now has a richer income. Strictly speaking the gain from remittances is just the gain from INTER-HOUSEHOLD reallocation of income between the migrant and those who stay behind, not the overall increase in household income due to migration.

A bunch of illuminating graphs intervene and then:

All that basically means that the observed benefits from remittances that people rave so much about are mostly just straight up benefits from LABOR MIGRATION. Which are huge, but somehow that just isn’t being said.

It is interesting that people fix on the humanitarian effect of migrants sending money back home. The immigrant, prior to migration, was presumably just about as poor as the people he or she is sending money home to. So if it’s so good for those people to get that money, then it was just as good for the migrant to make it in the first place. But I’m just saying the same thing.

There’s a lot more, all of it interesting.

[Hat tip: Ambrosini.]

Viewing 7 Comments

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    "YouNotSneaky" is definitely an "economist", in that it forgot to include everything involved in the equation.

    For instance, even the NYT came close to doing an expose on one of the companies that profits from illegal activity, in this case by sending money home. In order to keep their profits up, they've supported politicians who look the other way, and opposed politicians who support our laws. So, when you actually think this through, PoliticalCorruption plays a role in the money sending trade. And, PoliticalCorruption is a definite cost to we Americans.

    Yet, oddly enough, "YouNotSneaky" didn't figure that cost into its calculations. Thus it's an "economist" and not an economist.
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    > Bottom line is that most of the so called “gains from remittances” are straight up gains from IMMIGRATION.

    Wasn't this already obvious?
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    Um, no Lonewacko, the politicians enforcing unjust laws are the ones who are corrupt. An unjust law is no law at all and can (and should!) be routinely violated. Your fetish for respecting unjust laws is... disturbing. I'm glad Anne Frank never tried to hide in your attic.
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    Notice: the comment from Micha Ghertner is not a new low for libertarians, just one of a very long series of extreme lows.

    I hasten to add that since I don't know what the situation is in their universe, in ours we will always have borders and enforcement for them, otherwise billions of people would try to come here with (to we sane people) predictable results. Also, in our universe living in MX is not akin to facing going to the gas chambers.

    I mean, really.
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    Complain all you want, TLB, but you have ignored the question. Does an unjust law demand respect or not? Is it corrupt to violate an unjust law, or is it corrupt to enforce an unjust law? The Anne Frank analogy points directly to these questions. You don't wish to answer because answering means acknowledging either than unjust laws demand no respect and that to enforce them is itself corrupt, or it means acknowledging that you would have turned Anne Frank in to the authorities. In the first case, you would be contradicting your own stated "enforce the law" fetish; in the second case you would look like a monster. You choose.

    And your claim that "billions" (plural!) would try to enter and live permanently in the U.S. in the absence of international apartheid belies a tremendous ignorance of economics. World population is currently 6.7 billion. If we take your claim on its own terms, and assume that immigrants make conditions in the U.S. less attractive and not more, then it is preposterous to assume that 25% or more (i.e. "billions") of the world's population would immigrate here, unless we first ignore the dynamic effects of immigration itself. The more people arrive - assuming as you do that immigration is a net harm - the less attractive immigration becomes to potential immigrants, and thus immigration tapers off at an equilibrium.

    But, then, explaining basic economics to anti-immigration bigots is never an easy task.
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    Micha, you'll want to study up on Godwin's Law to avoid derailing a potentially interesting conversation. This thread is officially over and you've officially lost.
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    Sorry, Ben, but Godwin's Law cuts both ways. It is true that one should not overuse extreme analogies, especially when they are totally inappropriate and uncalled for given the specific situation, but at the same time, this cannot mean that all extreme analogies are at all times inappropriate, or else whatever we might potentially learn from past tragedies would be forever lost as a source of moral education and wisdom.

    Invoking Godwin's Law when a Hitler, Nazi, or Holocaust analogy is actually relevant is just as much of a logical error and conversation stopper as invoking a Nazi analogy when doing so is irrelevant to the argument. Godwin's Law does not and cannot mean that all discussion involving what we might learn from the experience of the Holocaust is totally out of bounds for rational discussion.

    And the Anne Frank analogy is not just completely relevant to this particular discussion, it is also frequently used in moral philosophy as an example of what is wrong with overly-legalistic ethical systems such as strict interpretations of Kantian deontology. If it is the case that one must never tell a lie no matter the consequences, then it must also be the case that one must give an honest and correct answer to Nazi officers if they ask you if you are hiding any Jews in your attic. And since most people rightfully recognize such a conclusion as morally outrageous, we are able to see what is wrong with strict obedience to immoral government laws.
 

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