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The latter result is puzzling, especially given the finding that remittance income helps families consume more. Consumption spending is a driver of short-term economic growth, which in turn should also lead to longer-term growth as industries expand to meet the increased demand. |
But research that digs deeper into the remittance-growth nexus increasingly suggests that remittances change economies in ways that reduce growth and increase dependence on these funds from abroad. In other words, there is increasing evidence of a remittance trap that causes economies to get stuck on a lower-growth, hi... |
Consider the case of Lebanon. For many years, this country has been one of the leading recipients of remittances, in both absolute and relative terms. During the past decade, inflows have averaged over $6 billion a year, equal to 16 percent of GDP. Lebanon received $1,500 a person in 2016, more than any other nation, a... |
Given the size of these inflows, it should not be surprising that remittances play a key if not leading role in Lebanon's economy. They constitute an essential part of the country's social safety net, accounting on average for over 40 percent of the income of the families that receive them. |
They have undoubtedly played a vital stabilizing role in a country that has endured civil war, invasions, and refugee crises in the past several decades. In addition, remittances are a valuable source of foreign exchange, amounting to 50 percent more than the country's merchandise exports. This has helped Lebanon maint... |
While remittances have helped the Lebanese economy absorb shocks, there is no evidence that they have served as an engine of growth. Real per capita GDP in Lebanon grew only 0.32 percent on average annually between 1995 and 2015. Even during 2005-15, it grew at an average annual rate of only 0.79 percent. |
Lebanon is not an isolated example. Of the 10 countries that receive the largest remittance inflows relative to their GDP--such as Honduras, Jamaica, the Kyrgyz Republic, Nepal, and Tonga--none has per capita GDP growth higher than its regional peers. |
And for most of these countries, growth rates are well below their peers. It is important to recognize that each of these countries is dealing with other issues that may also interfere with growth. But remittances appear to be an additional determining factor rather than just a consequence of slow growth. And remittanc... |
Returning to the case of Lebanon, the country's well-educated population could be expected to point to robust growth. Lebanese families, including those who receive remittances, spend much of their income on educating their young people, who score much higher on standardized mathematics tests than their peers in the re... |
Lebanon is also home to three of the top 20 universities in the Middle East, and researchers at these universities produce more research than their regional peers. Lebanon's abundant remittance inflows could provide seed capital to fund business start-ups led by its well-educated citizens. |
But statistics show that Lebanon has much less entrepreneurial activity than it should, especially in the high-tech information and communication technology sector. The size of this sector is less than 1 percent of GDP, and Lebanon scores very low on international gauges of this sector's development. |
Studies of the overall spending habits of remittance-receiving households in Lebanon show that less than 2 percent of inflows goes toward starting businesses. Instead, these funds are typically spent on nontraded goods such as restaurant meals and services, and on imports. |
Instead of starting new businesses--or even working in established ones--many young Lebanese choose to emigrate. The statistics are stark: up to two-thirds of male and nearly half of female university graduates leave the country. Employers complain of an emigration brain drain that has caused a dearth of highly skilled... |
This shortage has been identified as a leading obstacle to diversifying Lebanon's economy away from tourism, construction, and real estate, its traditional sources of growth. For their part, young people who choose to seek their fortune elsewhere cite a lack of attractive employment opportunities at home. |
Part of the remittance trap thus appears to be the use of this source of income to prepare young people to emigrate rather than to invest in businesses at home. In other words, countries that receive remittances may come to rely on exporting labor, rather than commodities produced with this labor. In some countries, go... |
But why would this situation develop and persist? |
Research into both the household-level and economy-wide effects of remittances on their recipients provides an answer to this question. The impact on individual countries that receive significant remittances--such as Egypt, Mexico, and Pakistan--has been studied, and cross-country analysis of a variety of countries tha... |
To begin with, remittances are spent mostly on household consumption, and the demand for all products (nontraded and traded) in an economy increases as remittances grow. |
This places upward pressure on prices. The flood of foreign exchange, along with higher prices, makes exports less competitive, with the result that their production declines. Some have referred to this syndrome as Dutch disease (see Chart 2). |
The effect of remittances on work incentives makes this problem worse, by increasing the so-called reservation wage--that is, the lowest wage at which a worker would be willing to accept a particular type of job. As remittances increase, workers drop out of the labor force, and the resulting increase in wages puts more... |
Resources then flow away from industries producing tradable products that face international competition toward those that serve the domestic market. The result: a decline in the number of better-paid, high-skill jobs, which are typical in the traded sector, and an increase in low-skill, poorly paid jobs in the nontrad... |
This shift in the labor market encourages higher- skilled workers to emigrate in search of better-paying jobs. Meanwhile, the cost of living for most families rises along with domestic prices, and the loss in competitiveness means that more products must be imported, hurting economic growth. This in turn increases the ... |
To make matters worse, remittances are often spent on real estate, causing home prices to rise and in some cases stoking property bubbles. This provides a motive to emigrate for young people seeking to earn enough to buy a home. The result of all this is a vicious circle of emigration, economic stagnation, rising cost ... |
Governments could potentially mitigate or break this cycle by taking steps to keep domestic industries competitive. But policies that can accomplish this, such as improving the education system and physical infrastructure, are expensive and take years to implement. And they require strong political will to succeed. |
As research has shown, however, remittances have important political economy side effects (see Chart 3). In particular, large inflows allow governments to be less responsive to the needs of society. |
The reasoning is simple: families that receive remittances are better insulated from economic shocks and are less motivated to demand change from their governments; government in turn feels less obligated to be accountable to its citizens. |
Many politicians welcome the reduced public scrutiny and political pressure that come with remittance inflows. But politicians have other reasons to encourage remittances. To the extent that governments tax consumption--say through value-added taxes--remittances enlarge the tax base. This enables governments to continu... |
Given these benefits, it is little wonder that many governments actively encourage their citizens to emigrate and send money home, even establishing official offices or agencies to promote emigration in some cases. |
Remittances make politicians' job easier, by improving the economic conditions of individual families and making them less likely to complain to the government or scrutinize its activities. Official encouragement of migration and remittances then makes the remittance trap even more difficult to escape. |
The absence of clear evidence linking remittances to increased economic growth--and the lack of examples of countries that experienced remittance-led growth--suggests that remittances do indeed interfere with economic growth. The example of Lebanon, moreover, gives a concrete example of how the remittance trap may oper... |
And if a remittances trap does exist, then what? |
Clearly, given their importance to the well-being of millions of families, remittances should not be discouraged. Is the remittance trap simply the cost societies must bear in exchange for a reduction in poverty? Not necessarily. |
Preventing the two downsides of remittances--Dutch disease and weaker governance--could help countries avoid or escape the remittance trap. Improving the competitiveness of industries that face foreign competition is the general prescription for mitigating Dutch disease. |
Specific measures include upgrading a country's physical infrastructure, improving the education system, and reducing the cost of doing business. Governments could also play a more active role in stimulating new business formation, including seed funding or other financial assistance for start-ups. At the same time, re... |
Enhancing economic competitiveness and strengthening governance and social institutions are already considered essential to the inclusive growth agenda. But the remittance trap lends urgency to these goals. |
Avoiding this potentially serious pitfall of remittances may actually be the key to unlocking their development potential by removing a previously unrecognized obstacle to inclusive development. |
*Opinions expressed in articles and other materials are those of the authors; they do not necessarily reflect IMF policy. |
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Wooster Collective has confirmed that Banksy's first film will premiere at Sundance this year. |
Wooster Collective has confirmed that Banksy’s first film will premiere at Sundance this year. Dubbed “the world’s first street art disaster movie”, it looks to be a unusual inside look of the street art world. |
Amazon's breakup with New York was still fresh when other cities started sending their own valentines to the online giant. |
It's been a complicated few weeks for Amazon, what with its abrupt pullout from a massive New York City development, extortion claims related to intimate photos taken by its founder Jeff Bezos and increasing antitrust scrutiny in Europe . |
Amazon will build a new headquarters in New York City, a stunning reversal to an ambitious plan that would have brought an estimated 25,000 jobs to the city. |
Election Day 2016 updates: Trump defeats Clinton to become next president of U.S. |
Nov. 8, 2016, 7:40 a.m. |
Today's the day when the old cliche is true: The only poll that counts is the one on election day. |
So what do the final election day polls show for Hillary Clinton and Donald Trump? Well, pretty much what they've been showing. |
“Our polls have shown Clinton’s lead in the national popular vote to be remarkably stable despite the many apparent twists and turns in the campaign,” said Jon Cohen, the chief research officer for SurveyMonkey. |
Nov. 9, 2016, 5:16 p.m. |
Anti-Trump protesters hit the streets across the U.S. |
Activists are not taking the idea of a Donald Trump presidency quietly. Hundreds of demonstrators across the U.S. hit the pavement during the day and evening Wednesday to protest the Republican's electoral victory. |
Nov. 9, 2016, 11:16 a.m. |
California voters on Tuesday defeated a ballot measure to repeal the state’s death penalty, and instead a proposition that aims to amend and expedite it narrowly leads. |
The outcome concluded a closely watched ballot race to address what people on both sides of the debate have agreed is a broken system. |
Nov. 9, 2016, 5:35 a.m. |
Republicans have held on to the 35th Assembly District on the central coast, with GOP candidate Jordan Cunningham defeating Democrat Dawn Ortiz-Legg, according to the Associated Press. |
Cunningham led Ortiz-Legg 54.6% to 45.4% with all precincts reporting. |
The two were running to replace termed-out Assemblyman Katcho Achadjian (R-San Luis Obispo), who ran for Congress but was knocked out in the June primary. |
Nov. 9, 2016, 5:34 a.m. |
California voters have approved Proposition 51, a $9-billion bond for school construction projects across the state. |
The measure was leading 53.9% to 46.1%, according to election returns at 5 a.m. Wednesday, and the Associated Press has called the victory. |
State funding to help finance repairs and new school facilities across California had run dry, and Proposition 51 will refill the pot. School construction needs billions of dollars every year, according to the nonpartisan Legislative Analyst's Office. With the new cash infusion, the state will once again match local di... |
Nov. 9, 2016, 2:01 a.m. |
Backers of a bond measure that would provide housing for many of the city's homeless were optimistic as early ballot counts favored the measure, which needs a two-thirds majority to pass. |
With 50% of precincts reporting early Wednesday morning, Measure HHH had captured 76% of the vote. |
“We earned our wings tonight," 8th District L.A. City Councilman Marqueece Harris-Dawson said on Tuesday night. "We completely lived up to the title City of Angels." |
Nov. 9, 2016, 1:40 a.m. |
Assemblywoman Catharine Baker (R-Dublin) has held on to her seat in a closely watched race against Democrat Cheryl Cook-Kallio in the East Bay. |
With nearly 95% of precincts reporting, Baker was leading, 56%-44%, against Cook-Kallio. |
Early in the campaign, Baker, who is a social moderate and fiscal conservative, was identified as one of Assembly Democrats' top Republican targets to pick off on their quest for a Democratic super-majority. |
Nov. 9, 2016, 1:32 a.m. |
The election of Donald Trump to the presidency sparked protests early Wednesday across California, with many demonstrations concentrated around college campuses. |
Nov. 9, 2016, 1:29 a.m. |
Assemblyman David Hadley (R-Manhattan Beach) was in a car on his way home early Wednesday morning after an election night party in Redondo Beach. |
With 42% of precincts reporting, Hadley was lagging behind challenger Al Muratsuchi, 53% to 47%. |
But the race is still close to call and both candidates will likely have to wait until later Wednesday, or perhaps even later, to know whether Hadley will keep his seat. |
Nov. 9, 2016, 1:25 a.m. |
California voters have approved a significant change of the rules in how proposed laws are approved by the Legislature, overwhelmingly supporting a new mandate for public review of legislation before any final vote. |
Proposition 54, which will impose a three-day waiting period before lawmakers can take action on the final version of bills, appeared headed for an easy victory on election night. As of early Wednesday, it was winning with 64% of the vote. |
The change in legislative rules was long discussed in the state Capitol but failed to gain momentum until the initiative written by a former GOP legislator and bankrolled by a wealthy Bay Area activist. |
Nov. 9, 2016, 1:20 a.m. |
Democratic Rep. Grace F. Napolitano won her bid for a 10th term in Congress, after a campaign that saw her opponent, state Assemblyman Roger Hernendez (D-West Covina), effectively end his campaign in August after a judge granted his ex-wife’s request for a domestic-violence restraining order against him. |
The Associated Press called the race with Napolitano claiming 63.1% of the vote to Hernandez's 36.9%. |
Baldwin Park City Councilwoman Susan Rubio gave graphic testimony detailing abuse she said she suffered during her relationship with Hernandez. |
CASTLEFORD Library is undergoing a £1m transformation as builders move in to turn it into a community hub. |
Construction work at the Carlton Street building – to be known as Castleford Forum – has begun, including demolition of a current extension to make way for an expansion of the library costing £1.4m. |
The building’s museum space will double to display more of the town’s heritage. |
Coun David Dagger, Wakefield Council’s cabinet member for culture, said: “This is the next stage in a new and improved library and museum for Castleford residents. |
“The work is a key milestone in the renovation of the Forum and I am pleased we are on track to open the improved facility next spring. |
Development work marks the end of a 13-year campaign by members of Friends of Castleford Library (FOCAL) and the Castleford Heritage Trust for a combined library, museum and arts service in the town, which was blighted by funding problems including three failed National Lottery bids. |
The library has been operating from a temporary location at Bridge Arts in Sagar Street since last month and users can continue to borrow books and use services there until the library reopens. |
The FBI wrote in a letter released Thursday that it used drones 10 times over U.S. soil, including during the nearly seven day standoff with hostage-taker Jimmy Lee Dykes in his Midland City, Ala. bunker. |
The FBI's admission came in a letter to U.S. Sen. Rand Paul in which the agency explained that drones – also known as unmanned aerial vehicles, or UAVs – used in the U.S. are never armed, and used only for surveillance. |
"For example," the letter states, "earlier this year in Alabama, the FBI used UAV surveillance to support the successful rescue of the 5-year-old child who was being held hostage in an underground bunker by Jimmy Lee Dykes." |
Drones have been used in two national security cases and eight criminal cases as support in fugitive tracking, drug investigations, kidnappings, and search and rescue missions, the FBI wrote. |
FBI Response to Rand Paul on drone use in the U.S. |
Haq, K.*, & Schindel, A. (2018). Pushing past hate: One community’s collaborative action to remove a racist school board member. Rethinking Schools. |
Patterson, A., Schindel, A., & Morrison, D. (2017). What’s science got to do with it?: Possibilities for social justice in science classroom teaching and learning. In S. Pennell, A. Boyd, H. Parkhouse, & A. LaGarry (Eds.), Possibilities in Practice: Social Justice Teaching in the Disciplines, pp. 145-158. New York: Pet... |
Tolbert, S., & Schindel, A. (2017). Altering the ideology of consumerism: Caring for land and people through school science. In G. Reis, M. Mueller, R. Lather, L. Silveres, & R. Oliveira, Eds., Sociocultural perspectives on youth ethical consumerism. Netherlands: Springer. |
Aug. 18 — The OECS Credit Union Summit is to be held in St. Lucia 18-22 August 2010. Approximately 300 delegates are expected to participate in the summit at the St. Lucian By Rex Resorts, in Reduit/Rodney Bay. The theme will be “Cooperating to withstand our present day challenges.” The Summit will address how best the... |
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