Theoretical Appraisal: Understanding Remittances

Journal article by Jeffrey H. Cohen, Ibrahim Sirkeci

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Abstract
The economic role of remittances in the lives of immigrant workers, their sending communities, and the developing nations they hail from is well documented (World Bank 2006a). The Council of Europe estimated that $72 billion flowed from workers to their homes in developing countries in 2002. This total was well in excess of the total official aid directed to developing nations that year (COE 2006: 7). Through the end of the decade and even during the global financial crisis of 2008 and 2009 remittance rates remained consistently strong and did not drop as did other forms of aid (see figure I.1 in the introduction). Similarly, the Organisation for Economic Co-operation and Development found that at least $126 billion followed the networks that immigrant workers maintained with their sending households and communities in 2005 (OECD 2005). The formal, legal transfers noted by these studies represent large and largely stable amounts of money (Maimbo and Ratha 2005; Ratha, Mohapatra, and Xu 2008; World Bank 2006a), yet they do not include informal, unofficial, and illegal transfers (Christiansen 2008; Lozano Ascencio 1998; Mohan 2002; Shehu 2004). Furthermore, although these are large amounts of money, the studies of remittances often do not acknowledge the anticyclical nature of remittances practices, the role remittances continue to play for movers and their families, and the measurable benefits that go directly and indirectly to developing nations’ economies and coffers even in moments of economic crisis (Lianos and Cavounidis 2010). Remittances can cushion the impact of financial crisis and support communities that might otherwise share in the misery of the moment.