Remittances and Development: Trends, Impacts, and Policy Options, A Review of the Literature

Previously confined to everyday conversations among migrants and their families, remittances are now on the minds and agendas of most governments, members of the civil society, the international community at large, and, to some extent, even the private sector. In spite of this surging interest in remittances, however, a close review of the academic and policy literature still suggests a yawning gap in terms of what is known and what could and should be done.

The continued deficiency in our understanding of some of the fundamental aspects of remittances is quite evident in the current literature. Outside of Latin America and some key countries in Asia, what can arguably be considered “basic” questions such as who sends and receives remittances, how much is remitted and received, and how remittance channels actually work on the ground have yet to be answered adequately.

This review finds that the bulk of the literature has focused more on the impact of remittances on development, particularly their impact on the economy of developing countries. Recent studies have pointed to remittances’ generally positive impact on human capital formation, investments, poverty, and macro-economic stability. Although some issues remain highly contested, foremost of which are remittances’ effect or lack thereof on growth, inequality, exchange rate, and inflation, by and large, the tone of the economic literature on remittances especially in the last five years or so has never been more optimistic.