Remittances and the Reduction of Vulnerability

Migrant remittances were estimated at $232 billion in 2005, 72 per cent going to developing countries. Although data are incomplete and not wholly reliable, these sums exceed official development assistance, foreign direct investment and private debt flows. Remittances affect household livelihoods and national economies alike. Evidence suggests that they can reduce the depth of poverty, although they can increase inequality. In practice, the low skilled remit more than their higher-skilled compatriots, although this is also a function of length of stay abroad and whether family accompanies the migrant. Remittances are often used for consumption purposes rather than investment, although such expenditures (e.g. for health care or schooling) should rightly be seen as productive in many settings. Remittances, both formal and informal, are of major benefit to non-migrants as well as migrants’ families, as they can have a multiplier effect on the community.