Remittances and Migration

Sometimes life is serendipitous. The issue of remittances arose in class yesterday, and this morning the Times has a long article on just this issue.

Two points are interesting. First, according to Times figures, remittances to developing countries total more than $300 billion per year. Total official development assistance (foreign aid) peaked at $130 billion in 2005.

Second, the Times suggests that the current US effort to stem inward migration from Mexico is slowing the flow of remittances from the US to Mexico.

It strikes me that this is likely to have perverse consequences. Squeezing remittances will reduce disposable income in the households that had been benefiting from these transfers. As their income falls, many more might try to move across the border, thereby creating additional migration.

Moreover, as the border patrol cracks down on migration, the carrying trade becomes seedier. "As tighter security makes crossing the border trickier and more hazardous, the traditional mom-and-pop operations in Mexico that used to ferry people across have been replaced by larger, more-professional criminal gangs, often with ties to the illegal drug trade."

To summarize, the crack down on migration stems remittances, increases poverty and migration, and fuels criminal activity. This is not good policy.