International Migration 1 International migration the basic numbers

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International Migration 1

International Migration 1

International migration: the basic numbers • Between 1965 and 2000, the fraction of people

International migration: the basic numbers • Between 1965 and 2000, the fraction of people living outside their countries of birth increased from 2. 2% to 2. 9% of world population – 175 million people in 2000 • Remittances have been huge and growing Sources: UN International Migration Report 2002, US Census Bureau. 2

Remittances vs. ODA, FDI (1991 -2005) Source: World Development Indicators 2007. Data are in

Remittances vs. ODA, FDI (1991 -2005) Source: World Development Indicators 2007. Data are in current US$. 3

Key questions • How does emigration to the rich world affect the economic outcomes

Key questions • How does emigration to the rich world affect the economic outcomes of migrants themselves? • How does emigration to the rich world affect families left behind, and origin-country economies more broadly? • What policies might help raise the development impact of remittances? 4

Clemens and Pritchett (2008) • A new statistic, income per natural: the mean annual

Clemens and Pritchett (2008) • A new statistic, income per natural: the mean annual income of persons born in a given country, regardless of where that person now resides • Almost 43 million people live in a group of countries whose income per natural collectively is 50% higher than GDP per resident – For 1. 1 billion people the difference exceeds 10% • Poverty estimates are very different for national residents and naturals – 26 percent of Haitian naturals who are not poor by the two-dollar -a-day standard live in the United States • “If economic development is defined as rising human well being, then a residence-neutral measure of well-being emphasizes that crossing international borders is not an alternative to economic development, it is economic development. ” 5

Table 2 b 6

Table 2 b 6

Table 2 b 7

Table 2 b 7

Causal effect of migration • But what is the causal effect of migration? •

Causal effect of migration • But what is the causal effect of migration? • Observed income differences could reflect: – Labor-supply effect – Selection effect – Causal effect of migration • Clemens and Pritchett (2008) review a variety of studies finding that at least 75% of the income difference is the causal effect of migration • Next: examine one important study providing estimated causal impact of migration on income: – Gibson, Mc. Kenzie, and Stillman (2006) 8

Gibson, Mc. Kenzie, and Stillman (2006) • What is the impact of migration on

Gibson, Mc. Kenzie, and Stillman (2006) • What is the impact of migration on the migrants? – One of the most difficult problems in migration studies, due to selectivity of migration – Very difficult to find an appropriate or convincing control group • This paper: use a lottery to obtain exogenous variation in migration – Lottery for Tongans to migrate to New Zealand • Estimate income gains from migration, using lottery as exogenous variation • Compare estimates from lottery to OLS, single-difference, doubledifference, IV, propensity score matching • Results: IV with a “good” instrument performs best – D-in-D and propensity score matching do OK as well 9

Table 3 10

Table 3 10

Table 4 11

Table 4 11

Table 5 12

Table 5 12

Table 6 13

Table 6 13

Key questions • How does emigration to the rich world affect the economic outcomes

Key questions • How does emigration to the rich world affect the economic outcomes of migrants themselves? • How does emigration to the rich world affect families left behind, and origin-country economies more broadly? • What policies might help raise the development impact of remittances? 14

Yang (2008) • What are impacts on families left behind? – Specifically, what do

Yang (2008) • What are impacts on families left behind? – Specifically, what do remittances help pay for at home? • Another natural experiment – June 1997: 6% of households in the Philippines had one or more members working overseas, in dozens of countries • July 1997: Asian financial crisis occurs – Large, sudden, heterogeneous changes in exchange rates in many locations of Filipino workers (see figure) – Philippine peso also depreciates • Examine impact of migrant exchange rate shocks on Philippine households 15

Distribution of Overseas Workers from Philippines (June 1997) 16

Distribution of Overseas Workers from Philippines (June 1997) 16

Exchange rates over time Philippine pesos per unit of foreign currency (July 1996 =

Exchange rates over time Philippine pesos per unit of foreign currency (July 1996 = 1) Exchange Rates in Selected Locations of Overseas Filipinos (Jul 1996 - Oct 1998) Start of Asian financial crisis (July 1997) US, Hong Kong, Saudi Arabia, Kuwait Japan Singapore Taiwan Malaysia Korea 17

Percent change in mean remittances Figure 1: Impact of migrant exchange rate shocks on

Percent change in mean remittances Figure 1: Impact of migrant exchange rate shocks on Philippine household remittance receipts (1997 -1998) Percent change in exchange rate NOTES–Exchange rates are in Philippine pesos per unit of foreign currency. Percent change in exchange rate is mean exchange rate from Oct 1997 to Sep 1998 minus mean exchange rate from July 1996 to June 1997, divided by the latter. Mean remittances are calculated among all households with a 18 single migrant in given overseas location. Percent change in mean remittances is between Jan - Jun 1997 and Apr-Sep 1998 reporting periods. Datapoints are the top 20 locations of Philippine overseas workers (as listed in Table 1).

Impact of migrant shocks on households 19

Impact of migrant shocks on households 19

Key questions • How does emigration to the rich world affect the economic outcomes

Key questions • How does emigration to the rich world affect the economic outcomes of migrants themselves? • How does emigration to the rich world affect families left behind, and origin-country economies more broadly? • What policies might help raise the development impact of remittances? 20

Raising development impact of remittances • An open area • Increasing migrant control over

Raising development impact of remittances • An open area • Increasing migrant control over remittance uses – El Salvador Study of Migrant Families • Remittances for microenterprise finance – Migrant-backed loans – Migrant co-signed loans • Other ideas? 21

Intro slide Remittances and The Problem of Control: A Field Experiment Among Migrants from

Intro slide Remittances and The Problem of Control: A Field Experiment Among Migrants from El Salvador Nava Ashraf, Harvard Business School Diego Aycinena, Francisco Marroquin University Claudia Martinez, University of Chile Dean Yang, University of Michigan 22

DC-area Salvadorans on the problem of control “I have many uncles and they get

DC-area Salvadorans on the problem of control “I have many uncles and they get drunk, so I just send money when needed, or I send to someone like my sister who I trust. ” Male, 34 years old, 8 months in the U. S. , works as roofer “The brother of my boss sent around $50, 000 to his mother over the years. When he thought he had enough money to build a house, he asked his mom for the money. She said she didn't have it. She had lent it to an uncle. When he asked for the money back, the uncle threatened to kill him if he came back to El Salvador for the money. ” Male, 30 years old, 1 year in the U. S. , works as a carpenter 23

Some open questions about remittances • Do migrants and recipients typically agree on the

Some open questions about remittances • Do migrants and recipients typically agree on the uses to which remittances should be put? • If not, how do such disagreements affect… – the choice of remittance recipients? – amounts remitted? – remittance uses? • If migrants were to be given more control over remittance uses… – would they remit more? – how would they direct them to be used? – what would be the impact on household-level development outcomes? 24

Remittances and savings • This research focuses on the control that migrants have over

Remittances and savings • This research focuses on the control that migrants have over how much of remittances are saved • Migrants frequently report wanting household to save some fraction of remittances – Savings potentially intended for use of either recipient or migrant • Migrants report stronger preferences that remittances be saved, compared to recipients • Migrants have little or no ability to control or monitor household savings in El Salvador – Can only request that household save a portion of cash received 25

Why would migrants save in home country? • If savings intended for regular use

Why would migrants save in home country? • If savings intended for regular use of family back home, U. S. -based accounts are inconvenient • If savings intended for U. S. -based migrant, many migrants consider U. S. savings insecure – Undocumented migrants fear they would lose savings in the U. S. if they were deported • Currently an open question whether savings accounts are primarily for recipients’ or migrants’ use 26

The experiment • We offered Salvadoran migrants in Washington, D. C. the ability to

The experiment • We offered Salvadoran migrants in Washington, D. C. the ability to directly channel remittances into savings accounts in El Salvador – Facilities developed for project in partnership with Salvadoran bank, previously not widely available • We randomly varied the degree of migrant control over accounts offered • Outcomes of interest: – Demand for accounts (take-up) – Savings accumulation – Remittances (identity of recipients, amounts) – Later household outcomes • E. g. , consumption, schooling, entrepreneurial investment, housing 27

Theoretical impacts • How should remittances change if migrants had more control over savings

Theoretical impacts • How should remittances change if migrants had more control over savings in the home country? • Case 1: funds saved out of remittances intended for use of recipient household – If migrant and recipient have similar savings preferences, increasing migrant control should have little or no effect – If migrants prefer recipient to save more, then increasing migrant control should lead to higher remittances and savings • Case 2: funds saved out of remittances intended for use of remitter (migrant) – Funds entrusted to remittance recipient, but monitoring is imperfect: a principal-agent problem – Increasing migrant control over savings could lead to higher savings (by migrant), but lower remittance flows to family

Treatments 0. Control group – Migrants encouraged to remit into a household member’s bank

Treatments 0. Control group – Migrants encouraged to remit into a household member’s bank account, but no account-opening assistance provided 1. Account for remittance recipient in El Salvador – Migrants encouraged to remit into an individual’s bank account – If no such account exists, offer to help household set up account – Migrant cannot check balance or withdraw 2. Joint account (for migrant and household) – Migrants encouraged to remit into shared account – New product: “Cuenta Unidos” – Migrant and hh each have ATM cards; migrant can check balance 3. Individual migrant account – Migrants encouraged to remit into own account – New product: “Ahorro Directo” – Only migrant has ATM card – Not shared with household

Marketing brochures Ahorro Directo Cuenta Unidos 30

Marketing brochures Ahorro Directo Cuenta Unidos 30

Rationales for treatment conditions 0. Control group: Provides counterfactual for assessing impact of offered

Rationales for treatment conditions 0. Control group: Provides counterfactual for assessing impact of offered savings facilities on later household outcomes (savings, remittances, consumption, investment, etc. ) 1. Account for remittance recipient: Provides counterfactual of demand for accounts where migrants have no control – If no differences vs. 2 and 3, indicates migrants don’t value control 2. Joint account (for migrant and household): Impact of having shared control over account – Monitoring of account balance – Shared ownership – But El Salvador joint owner has full ability to withdraw 3. Individual migrant account: Impact of exclusive control over account

Hypotheses to be tested • Hypothesis 1: Take-up of new savings products will be…

Hypotheses to be tested • Hypothesis 1: Take-up of new savings products will be… – Highest for Treatment 3 (individual migrant account) – Next-highest for Treatment 2 (joint account) – Lowest for Treatment 1 (account for remittance recipient) – Difference should reflect value migrants place on control over savings • Hypothesis 2: Growth in migrant savings will be… – Highest for Treatment 3 – Next-highest for Treatment 2 – Next-highest for Treatment 1 – Smallest for Treatment 0 • In later rounds, will examine effects on other household investment activities, such as schooling, health spending, entrepreneurship

Overview of treatment protocols • Migrants recruited at Salvadoran consulates and Banagricola remittance agencies

Overview of treatment protocols • Migrants recruited at Salvadoran consulates and Banagricola remittance agencies – Must have remitted to someone in El Salvador in last 12 months, and have been in U. S. for <15 years – Subsample of migrants and recipient households administered comprehensive baseline survey • Migrants randomly assigned to one of 4 experimental conditions – After stratification by gender, US account status, years in US (3 categories), and relationship to recipient (4 categories) • Marketing team member visits each migrant in person to administer treatment • Visits take place in location of migrant’s choice – Typically: home, workplace, restaurant, nearest Banagricola agency – Some visits arranged in advance, others occur on the spot 33

ESSMF marketing team 34

ESSMF marketing team 34

Marketing visit (1) 35

Marketing visit (1) 35

Marketing visit (2) 36

Marketing visit (2) 36

Equalizing transaction costs • Account-opening costs – For all account types, account opening requires

Equalizing transaction costs • Account-opening costs – For all account types, account opening requires visit by remittance recipient to a Banco Agricola branch in El Salvador • Remittance transfer cost – All accounts have equal cost of inbound remittance – Inbound remittance costs also equalized with cash remittance 37

Remittance price randomization • Remittance prices randomized between $4 and $9 – For a

Remittance price randomization • Remittance prices randomized between $4 and $9 – For a remittance up to $1500 – VIP card used to track remittances • Will examine price elasticity of remittances 38

Baseline survey contents • Demographics, household composition • Employment and income • Detailed consumption

Baseline survey contents • Demographics, household composition • Employment and income • Detailed consumption in US and El Salvador • Use of financial services – Savings – Remittances – Credit • Financial literacy, planning • Communication and conflict with family • Migration history 39

Migrant survey – Washington DC 40

Migrant survey – Washington DC 40

Household survey – El Salvador 41

Household survey – El Salvador 41

Basic summary statistics • Demographics – 29% female – Mean age: 30. 8 –

Basic summary statistics • Demographics – 29% female – Mean age: 30. 8 – Mean years in US: 5. 47 • Employment and income – Top employment categories are construction (32%), food services (15%), cleaning services (10%) – For migrant, median annual earnings is $17, 945 for surveyed individual and $25, 458 for household – For recipient household, median annual income: $2, 864 • Remittances – Most common remittance amount sent: $200 (25%) – Median annual remittances: $3, 900 – Median remittances as share of migrant hh income: 14. 4% 42

Sources of income in recipient households Agriculture 2% Entrepreneurship 5% Other 6% Wages 15%

Sources of income in recipient households Agriculture 2% Entrepreneurship 5% Other 6% Wages 15% Remittances 72% 43

Communication with family • 86% of migrants have a cellphone • 94% of migrants

Communication with family • 86% of migrants have a cellphone • 94% of migrants have not visited in the past 3 years (proxy for legal status) • 81% of migrants communicate at least once a week 44

Methods of communicating with family Letters. Email Other 1% 1% 1% Landline phone 22%

Methods of communicating with family Letters. Email Other 1% 1% 1% Landline phone 22% Cellphone 75% 45

Savings: migrant • 69% have a savings account – 51% have one in US

Savings: migrant • 69% have a savings account – 51% have one in US only – 9% have one in El Salvador only – 9% have one in both countries • But savings are quite low for most migrants – Median savings: $700 – Median savings as % of annual hh income: 2. 8% • Migrants express desire for more savings – 37% “very unsatisfied” or “unsatisfied” with current level of savings – 85% would open account in El Salvador if given opportunity to do so 46

Savings: recipient household • Only 21% have a savings account • Savings are low

Savings: recipient household • Only 21% have a savings account • Savings are low – Median savings: $0 (mean savings: $301) 47

Revealing preferences for remittance uses • Goal: Reveal via survey answers whether migrants and

Revealing preferences for remittance uses • Goal: Reveal via survey answers whether migrants and households differ in their preferences over how remittances are used • Problem: simply asking migrants and households about their expenditure preferences may not yield useful answers – Answers may be automatic, conditioned by what respondents think is the “right” answer – Respondents may not think carefully (in way they would if actual money were at stake) • Our approach: enter respondents into a “remittance raffle” – Winning family in El Salvador will receive remittance of $100 – Migrants specify how they would like the money to be used by recipients – Household respondent specifies how they would like the money to be used when received – 13 categories of expenditures – “Cash” is not an option

Raffle use categories • • • • Daily consumption Clothing Housing (includes rent, construction,

Raffle use categories • • • • Daily consumption Clothing Housing (includes rent, construction, mortgage) Medical expenditures Educational expenses Utilities bills Phone bills Agricultural inputs Small business expenses Savings Durable goods Automobile payments Other (specify) Question: Do migrants allocate more money to certain expenditures than the corresponding remittance-receiving households?

Allocations of $100 raffle winnings Durable goods 0. 41% Phone bills Small 1. 36%

Allocations of $100 raffle winnings Durable goods 0. 41% Phone bills Small 1. 36% Other business 6. 37% expenses Agricultural Automobile inputs payments 0. 25% 0. 08% 2. 93% Utilities bills 3. 36% Daily consumption 43. 96% Medical expenditures 9. 01% Housing 3. 79% Educational expenses 4. 07% Clothing 6. 91% Savings 17. 49% Migrant 50

Allocations of $100 raffle winnings Durable Utilities bills Agricultural goods inputs 3. 36% 0.

Allocations of $100 raffle winnings Durable Utilities bills Agricultural goods inputs 3. 36% 0. 41% 0. 25% Phone bills Other 1. 36% 6. 37% Small business expenses 2. 93% Automobile payments 0. 08% Daily consumption 43. 96% Medical expenditures 9. 01% Housing 3. 79% Educational expenses 4. 07% Agricultural inputs Phone bills 0. 35% 0. 55% Other 4. 92% Utilities bills 3. 53% Educational expenses 6. 26% Small Medical business expenses expenditures 7. 83% 1. 00% Housing 2. 18% Clothing 6. 05% Clothing 6. 91% Savings 17. 49% Migrant Durable goods 1. 11% Daily consumption 63. 76% Savings 2. 45% Remittance recipient 51

Migrant vs. household raffle winnings allocation (US$) Raffle use categories Daily consumption Savings Clothing

Migrant vs. household raffle winnings allocation (US$) Raffle use categories Daily consumption Savings Clothing Housing Medical expenditures Educational expenses Utilities bills Small business expenses Phone bills Agricultural inputs Durable goods Automobile payments Other (specify) Num. obs. Migrant (in U. S. ) Remittance Recipient (in El Salvador) 43. 96 17. 49 6. 91 3. 79 9. 01 4. 07 3. 36 2. 93 1. 36 0. 25 0. 41 0. 08 6. 37 63. 76 2. 45 6. 05 2. 18 7. 83 6. 26 3. 53 1. 00 0. 55 0. 35 1. 11 0. 00 4. 92 1, 208 Difference P-value: test of (migrant minus equality of recipient means allocation) -19. 80 15. 04 0. 86 1. 61 1. 18 -2. 19 -0. 17 1. 93 0. 81 -0. 10 -0. 70 0. 08 1. 46 0. 000 0. 296 0. 013 0. 235 0. 003 0. 785 0. 001 0. 023 0. 638 0. 041 0. 318 0. 103

Balance across treatment groups 53

Balance across treatment groups 53

Analysis of take-up decision • Definition of “take-up”: migrant fills out account-opening forms during

Analysis of take-up decision • Definition of “take-up”: migrant fills out account-opening forms during marketing visit • Focus on migrants offered Treatments 1, 2, or 3 – Account opening for Treatment 0 requires analysis of internal bank data or follow-up survey 54

Percentage opening accounts, by treatment 60% 53. 1% 47. 8% 50% 40% 33. 1%

Percentage opening accounts, by treatment 60% 53. 1% 47. 8% 50% 40% 33. 1% 30% 20% 10% 0% Treatment 1: Remittance Treatment 2: Joint account Treatment 3: Joint account recipient account only (Cuenta Unidos) + individual account (Ahorro Directo) • Percentages of migrants filling out account-opening forms as of May 19, 2008 (236 treatment 1, 253 treatment 2, and 243 treatment 3) 55

Regression specification • For migrant i : Yi = a + b Z 2

Regression specification • For migrant i : Yi = a + b Z 2 i + g Z 3 i + Xi’f + εi – – Yi = takeup indicator Z 2 i = treatment 2 indicator Z 3 i = treatment 3 indicator Xi = vector of control variables (collected at baseline)

Impact of treatments on account opening Dependent variable: Migrant filled out account-opening forms during

Impact of treatments on account opening Dependent variable: Migrant filled out account-opening forms during marketing visit (1) (2) (3) (4) Treatment 2 (joint account) 0. 148*** (0. 044) 0. 169*** (0. 060) 0. 172*** (0. 060) Treatment 3 (joint account + indiv. migrant account) 0. 200*** (0. 045) 0. 196*** (0. 044) 0. 149** (0. 060) 0. 150** (0. 061) Constant 0. 331*** (0. 032) 0. 445*** (0. 046) 0. 472*** (0. 061) 0. 759*** (0. 192) Y Y Controls for stratification variables Additional migrant, recipient controls Observations R-squared 732 0. 028 732 0. 078 408 0. 055 408 0. 085 P-value of F-test of equality of Treatment 2 and 3 coefficients 0. 234 0. 275 0. 742 0. 716 * significant at 10%; ** significant at 5%; *** significant at 1% 57

Impact of treatments on account opening Dependent variable: Migrant filled out account-opening forms during

Impact of treatments on account opening Dependent variable: Migrant filled out account-opening forms during marketing visit (1) (2) (3) (4) Treatment 2 (joint account) 0. 148*** (0. 044) 0. 169*** (0. 060) 0. 172*** (0. 060) Treatment 3 (joint account + indiv. migrant account) 0. 200*** (0. 045) 0. 196*** (0. 044) 0. 149** (0. 060) 0. 150** (0. 061) Constant 0. 331*** (0. 032) 0. 445*** (0. 046) 0. 472*** (0. 061) 0. 759*** (0. 192) Y Y Controls for stratification variables Additional migrant, recipient controls Observations R-squared 732 0. 028 732 0. 078 408 0. 055 408 0. 085 P-value of F-test of equality of Treatment 2 and 3 coefficients 0. 234 0. 275 0. 742 0. 716 * significant at 10%; ** significant at 5%; *** significant at 1% 58

Impact of treatments on account opening Dependent variable: Migrant filled out account-opening forms during

Impact of treatments on account opening Dependent variable: Migrant filled out account-opening forms during marketing visit (1) (2) (3) (4) Treatment 2 (joint account) 0. 148*** (0. 044) 0. 169*** (0. 060) 0. 172*** (0. 060) Treatment 3 (joint account + indiv. migrant account) 0. 200*** (0. 045) 0. 196*** (0. 044) 0. 149** (0. 060) 0. 150** (0. 061) Constant 0. 331*** (0. 032) 0. 445*** (0. 046) 0. 472*** (0. 061) 0. 759*** (0. 192) Y Y Controls for stratification variables Additional migrant, recipient controls Observations R-squared 732 0. 028 732 0. 078 408 0. 055 408 0. 085 P-value of F-test of equality of Treatment 2 and 3 coefficients 0. 234 0. 275 0. 742 0. 716 * significant at 10%; ** significant at 5%; *** significant at 1% 59

Breakdown of accounts in Treatment 3 Joint account only 3% No account 47% Joint

Breakdown of accounts in Treatment 3 Joint account only 3% No account 47% Joint + indiv. migrant account 50% Percentages out of 129 individuals opening accounts in Treatment 3 as of May 19, 2008. 60

Other correlates of account opening Dependent variable: Migrant filled out account-opening forms during marketing

Other correlates of account opening Dependent variable: Migrant filled out account-opening forms during marketing visit Treatment 2 (joint account) Treatment 3 (joint account + indiv. migrant account) Migrant is female Migrant has US bank account Migrant has been in US 6 -10 years Migrant has been in US 11 -15 years Recipient is migrant's spouse Recipient is migrant's child Recipient is migrant's other relative Constant 0. 148*** (0. 044) 0. 196*** (0. 044) -0. 054 (0. 040) -0. 055 (0. 039) -0. 129*** (0. 041) -0. 289*** (0. 059) 0. 010 (0. 058) 0. 051 (0. 087) 0. 048 (0. 040) 0. 445*** (0. 046) Observations R-squared 732 0. 078 P-value of F-test of equality of Treatment 2 and 3 coefficients 0. 275 * significant at 10%; ** significant at 5%; *** significant at 1% 61

Other correlates of account Dependent variable: Migrant filled out account-opening forms during marketing visit

Other correlates of account Dependent variable: Migrant filled out account-opening forms during marketing visit opening (2) Treatment 2 (joint account) 0. 172*** (0. 060) Migrant's years of education 0. 003 (0. 005) Treatment 3 (joint account + indiv. migrant account) 0. 150** (0. 061) Migrant's raffle allocation to savings 0. 000 (0. 001) Migrant is female -0. 037 (0. 059) Migrant plans for retirement 0. 060 (0. 054) Migrant has US bank account -0. 028 (0. 053) Log (migrant's annual income) -0. 009 (0. 013) Migrant has been in US 6 -10 years -0. 116** (0. 055) Recipient's years of education 0. 001 (0. 005) Migrant has been in US 11 -15 years -0. 195** (0. 091) Recipient's raffle allocation to savings 0. 000 (0. 002) Recipient is migrant's spouse 0. 035 (0. 088) Recipient plans for retirement 0. 051 (0. 076) Recipient is migrant's child 0. 112 (0. 142) Log (recipient's hh income) -0. 031* (0. 018) Recipient is migrant's other relative 0. 093 (0. 058) Recipient has bank account -0. 163** (0. 067) Constant 0. 759*** (0. 192) Observations R-squared 408 0. 085 P-value of F-test of equality of Treatment 2 and 3 coefficients 0. 716 * significant at 10%; ** significant at 5%; *** significant at 1% 62

Evidence for migrant control? • Higher take-up in Treatment 2 and 3 vs. 1

Evidence for migrant control? • Higher take-up in Treatment 2 and 3 vs. 1 may indicate: – Migrant desire for control, or – Migrant desire for convenience (easy access to funds from U. S. ) • Take-up is not statistically significantly higher in Treatment 3 vs. 2 • But 95% of migrants opening accounts in treatment 3 open Ahorro Directo (individual migrant account) – Highly suggestive of migrant desire for control • Data still to come will shed further light: assess whether total savings balances are significantly higher in Treatment 3 vs. 2 63

Heterogeneity in treatment effect 64

Heterogeneity in treatment effect 64

Heterogeneity in treatment effect (2) Dependent variable: Migrant filled out account-opening forms during marketing

Heterogeneity in treatment effect (2) Dependent variable: Migrant filled out account-opening forms during marketing visit (2) (3) Treatment 2 or 3 0. 302*** (0. 106) 0. 247** (0. 116) (T. 2 or 3) * Migrant has US bank account -0. 225** (0. 113) (T. 2 or 3) * Migrant has US bank account only -0. 110 (0. 128) (T. 2 or 3) * Migrant has ES bank account only 0. 187 (0. 187) (T. 2 or 3) * Migrant has both US and ES bank account -0. 458** (0. 198) (T. 2 or 3) * Migrant is female 0. 010 (0. 118) 0. 022 (0. 118) (T. 2 or 3) * Migrant has been in US 6 -10 years -0. 054 (0. 118) -0. 065 (0. 118) (T. 2 or 3) * Migrant has been in US 11 -15 years 0. 308 (0. 202) 0. 257 (0. 204) (T. 2 or 3) * Recipient is migrant's spouse -0. 160 (0. 186) -0. 146 (0. 188) (T. 2 or 3) * Recipient is migrant's child -0. 104 (0. 268) -0. 127 (0. 269) (T. 2 or 3) * Recipient is migrant's other relative 0. 001 (0. 117) 0. 008 (0. 117) Observations R-squared 408 0. 075 408 0. 089 * significant at 10%; ** significant at 5%; *** significant at 1% 65

Heterogeneity in treatment effect (3) Dependent variable: Migrant filled out account-opening forms during marketing

Heterogeneity in treatment effect (3) Dependent variable: Migrant filled out account-opening forms during marketing visit Treatment 2 or 3 0. 032 (0. 391) (T. 2 or 3) * Migrant has US bank account only -0. 064 (0. 135) (T. 2 or 3) * Migrant's raffle allocation to savings -0. 000 (0. 001) (T. 2 or 3) * Migrant has ES bank account only 0. 194 (0. 197) (T. 2 or 3) * Migrant plans for retirement 0. 023 (0. 120) (T. 2 or 3) * Migrant has both US and ES bank account -0. 432** (0. 205) (T. 2 or 3) * Log (migrant's annual income) -0. 007 (0. 027) (T. 2 or 3) * Migrant is female 0. 029 (0. 128) (T. 2 or 3) * Recipient's years of education -0. 006 (0. 012) (T. 2 or 3) * Migrant has been in US 6 -10 years -0. 082 (0. 123) (T. 2 or 3) * Recipient's raffle allocation to savings 0. 003 (0. 004) (T. 2 or 3) * Migrant has been in US 11 -15 years 0. 188 (0. 212) (T. 2 or 3) * Recipient plans for retirement 0. 258 (0. 165) (T. 2 or 3) * Recipient is migrant's spouse -0. 119 (0. 202) (T. 2 or 3) * Log (recipient's hh income) 0. 025 (0. 038) (T. 2 or 3) * Recipient is migrant's child 0. 000 (0. 303) (T. 2 or 3) * Recipient has bank account 0. 053 (0. 153) (T. 2 or 3) * Recipient is migrant's other relative 0. 057 (0. 130) (T. 2 or 3) * Migrant's years of education 0. 002 (0. 012) Observations R-squared 408 0. 128 * significant at 10%; ** significant at 5%; *** significant at 1% 66

Summary of findings so far • Migrant demand for savings accounts in El Salvador

Summary of findings so far • Migrant demand for savings accounts in El Salvador rises when they are offered more possibility of control over them – Demand is 60% higher when migrants have option of joint or individual (migrant) ownership over accounts, compared to accounts in the name of someone else in El Salvador • Increase in take-up when migrants are additionally offered option of individual ownership (vs. joint ownership) is relatively small – But when individual ownership is offered, 95% of migrants opening accounts avail of individual ownership – Highly suggestive of demand for migrant control • Additional tests of importance of migrant control await availability of savings data 67

To be continued… • Marketing visits to offer products are continuing through July 2008

To be continued… • Marketing visits to offer products are continuing through July 2008 • Savings and remittance data will be available in fall 2008 • Follow-up survey in early-mid 2009 – Examine effects on remittances, savings, consumption, investments (education, small enterprises), etc. 68

Extra slides 69

Extra slides 69

Principal-agent problem: outline • Remittances have two functions: 1) funds for investment by migrant

Principal-agent problem: outline • Remittances have two functions: 1) funds for investment by migrant (principal), and 2) incentive payments for hh (agent) • Migrant sends funds for investment k, and hh chooses fraction f that is spent in investment (consuming remainder) – Household must conceal consumption of uninvested funds at cost c(f) • Investment returns have random component, and migrant cannot observe f, only total investment returns x – Problem for migrant is how to reduce diversion of funds by hh – Migrant implements incentive scheme for hh based on returns x; payments to hh are s(x) • Prediction: ability to directly control investments (e. g. , savings, housing, education) raises remittances-as-investment (k) but reduces payments to hhs (s) – Total resources transferred by migrant should rise, even as hh receives less

Summary statistics Variable Mean Std. Dev. 10 th pct. Median 90 th pct. Num.

Summary statistics Variable Mean Std. Dev. 10 th pct. Median 90 th pct. Num. Obs. Treatment 0 (no savings facility offered) Treatment 1 (remittance recipient account only) Treatment 2 (joint account) Treatment 3 (joint + migrant account) Migrant is female Migrant has US bank account Recipient is migrant's parent Recipient is migrant's spouse Recipient is migrant's child Recipient is migrant's other relative Migrant has been in US 0 -5 years Migrant has been in US 6 -10 years Migrant has been in US 11 -15 years 0. 23 0. 25 0. 26 0. 25 0. 29 0. 63 0. 51 0. 13 0. 05 0. 30 0. 51 0. 37 0. 12 0. 43 0. 44 0. 45 0. 48 0. 50 0. 33 0. 22 0. 46 0. 50 0. 48 0. 32 0 0 0 0 0 1 1 0 0 0 1 1 1 1 1 0 1 1 956 956 956 956 Migrant's years in the US Migrant has US bank account only Migrant has El Salvador bank account only Migrant has account in both US and El Salvador Migrant allocation to savings in raffle Migrant's annual income (US$) Migrant's household's annual income (US$) Migrant's years of education Migrant's age Migrant's annual remittances sent (US$) Migrant's remittances as share of annual hh inc. Migrant's total hh savings balance (US$) Migrant's savings as share of annual hh inc. Migrant is US citizen Migrant hh size in U. S. Migrant is married or partnered Migrant is coresident with spouse/partner Recipient allocation to savings in raffle Recipient's annual hh income (US$) Recipient has savings account Recipient total hh savings balance (US$) Recipient's years of education Recipient's age Recipient's annual remittances received (US$) Recipient hh size 5. 47 0. 51 0. 09 19. 08 27, 110 39, 760 8. 43 30. 83 4, 851 0. 683 3, 531 0. 207 0. 01 4. 89 0. 60 0. 75 1. 89 4, 474 0. 21 301 5. 05 47. 14 2, 645 4. 59 3. 51 0. 50 0. 28 0. 29 38. 95 107, 315 130, 216 4. 94 7. 72 3, 951 3. 836 19, 391 1. 050 0. 08 2. 18 0. 49 0. 44 13. 02 7, 664 0. 41 1, 370 5. 62 14. 98 2, 834 2. 38 1 0 0 4, 403 6, 850 1 22 1, 200 0. 033 0 0. 000 0 2 0 0 0 600 0 26 250 2 5 1 0 0 0 17, 945 25, 458 9 29 3, 900 0. 161 700 0. 028 0 5 1 1 0 2, 864 0 0 3 48 1, 800 4 10 1 0 0 100 39, 011 60, 192 12 41 9, 600 0. 688 8, 000 0. 299 0 8 1 1 0 8, 751 1 275 12 67 5, 900 8 692 692 692 666 692 648 688 692 690 631 629 689 692 687 396 631 630 621 630 631 71