Lecture 9 Remittances Are remittances a substitute for

Lecture 9: Remittances Are remittances a substitute for Canadian Aid? 9/25/2020 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 9/25/2020 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? 9/25/2020 3

Distribution of Remittances 9/25/2020 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. 9/25/2020 5

Household Transfers 9/25/2020 6

Charitable Remittances 9/25/2020 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? 9/25/2020 8

Debate • If Canada wants to aid development it should remove current immigration policy of selecting the highly skilled and allow 250, 000 unskilled immigrants to enter yearly.