Lecture 11 Remittances or Gifts Are remittances a

Lecture 11: Remittances or Gifts? Are remittances a substitute for Canadian Aid? 12/14/2021 1

Motivations • Altruism: One way – For how long and to whom? • Implicit Contract: – For how long and to whom? • Combination of both • Does motivation differ by Immigration Status? – Temporary vs. Permanent 12/14/2021 2

Canadian Case • Why so little: – Less than 6% of total HH expenditures – Less than 1/3 of foreign-born remit – Largest remittances by older vintage of immigrants – What do remittances look like over life cycle? – What is split between household and charitable remittances? 12/14/2021 3

Distribution of Remittances 12/14/2021 4

Table 3: Expenditure Elasticities for Remittances to Persons Calculated from LA/AIDS, 1992/1996 Unrestricted Restricted for Homogeneity and Symmetry Population Uncontrolled Controlled Group Income Group all top Y/2 bottom Y/2 Canadian 1. 07 1. 27 1. 19 1. 88 1. 73 1. 83 N. Am. &W. Eu. 1. 29 1. 43 1. 67 2. 28 2. 14 2. 23 S&E European 1. 01 1. 11 1. 09 2. 07 1. 59 2. 29 Ch. , As. &Oc. 1. 09 1. 12 1. 09 1. 10 1. 13 1. 09 Canadian 1. 09 1. 25 1. 20 1. 86 1. 70 1. 78 N. Am. &W. Eu. 1. 29 1. 43 1. 66 2. 25 2. 10 2. 18 S&E European 0. 98 1. 06 1. 08 2. 08 1. 60 2. 36 Ch. , As. &Oc. 1. 09 1. 12 1. 10 1. 13 1. 09 Notes: Elasticity is computed through the formula , where is the actual mean expenditure share and is the estimated household income coefficient. 12/14/2021 5

Household Transfers 12/14/2021 6

Charitable Remittances 12/14/2021 7

What is done with remittances? • Household consumption – Who gets: poorest or middle class – Is it invested: schooling, capital equipment • Two for One Mexico Programme • Mexican heroes to Mexican exploited • Are remittances a substitute for aid or FDI? 12/14/2021 8

Canadian Aid • Size of Aid programme – 2004 -05 ODA/GNI=. 32 or $ 14. 4 billions – What is UN goal? ODA/GNI=1% – What countries achieved above? • Composition of Aid Programme – ODA= Official Development Assistance • ODA is – concessional in nature, provided by official government bodies for development purposes 12/14/2021 9

Canadian Aid • The Case for Aid: – Humanitarian and economic • What percent of Canadian aid humanitarian? – Disaster relief, Vitamin A, HIV-AID • What percent of Canadian is for economic development? – Industrial Aid, foreign student training, good governance – Who should get Aid ? • Should it be distributed by need or by level of development? • Should it be distributed through multinational bodies? • Harder Case 12/14/2021 10

Canadian Aid • Economic Case: – Foreign exchange gap: is difference between the following: • Id+If < Sd+Sf – – 12/14/2021 where Sd= domestic savings in local currency where Sf = Savings held in foreign hard curreny where Id = Investment component financed domestically where Id = Investment component must be financed with hard currency 11

Canadian Debate • Debate 1: Canada versus the Poor World • Be it resolved that Canada suspend its Aid programme and replace it with free trade in all products from your country and unlimited immigration from your country. • Two teams: 3 players each. Winner receives 4 bonus points, second place 2 points. • Team A: Consists of only Canadians and represents Canada’s interests • Team B: Consists of only representatives of Xenandu, a typical underdeveloped country 12/14/2021 12

Debate: Who should get Aid • Class Assignment #4: • You have been asked by your boss, Mr. Peter Harder who heads Canada's aid programme (CIDA) to outline an argument to justify why your country is deserving of a portion of Canada's $100 billion aid package. Using one economic, social, demographic indicator outline a case for your country. The basic components in this argument are; A clear description, which outlines why your country is poor, but deserving. This would involve use of one economic, social and demographic indicator but also a discussion to demonstrate what positive features of your country, good gov't, health indicators, exports, education, or low population growth that indicates a capacity to use the aid. State exactly what the indicators are; for example health would be life expectancy, infant mortality rate, etc. Outline what specific forms of aid to alleviate what are the weak points of your economy as noted in your indicators. For example, my country has a high infant mortality rate; this would imply that it is poor but that health aid could alleviate this problem. Use at least four types of aid: education, health, agricultural, policing, water, resource conservation, etc. to illustrate your country's specific needs. Once you establish what type of aid is required, explain the connection between this form of aid and your country's future prospects of development. Conclusion: Tie together your indicators, your country's plight and a full description of the aid package in the final paragraph and make a recommendation to Peter Harder. The recommendation is for a specific form of aid, for a specific period of time and for a specific amount Use 500 word maximum. • • • 12/14/2021 13