World Development Report 1984

As immigrants increase as a proportion of the to $27 billion in 1980. In 1980, remittances propopulation,
they receive increasing attention and vided almost as much foreign exchange as exports
public resources. In the long run, these factors are did for Pakistan and Upper Volta; they were more
likely to be more important than purely economic than 60 percent of exports for Egypt, Turkey, and
factors in maintaining limits on immigration. Portugal, and about 40 percent for Bangladesh and
Yugoslavia.
CONSEQUENCES FOR THE SENDING COUNTRY. A Many countries have special schemes to attract
substantial part of recent migration has involved remittances. India and Yugoslavia allow foreign
unskilled workers. Migrant workers from the currency accounts, with interest and capital with-
Yemen Arab Republic (constituting more than 30 drawable in foreign currency. Bangladesh issues
percent of the national work force in 1981) were import permit vouchers, which carry a special
practically all unskilled. So were a large proportion exchange rate and may be freely negotiated.
of emigrants from other countries that sent labor to China, Korea, and the Philippines have mandatory
the booming Middle East in the 1970s-ranging remittance requirements.
from about 30 percent for Bangladesh and Jordan Migrant workers tend to save a lot. The average
to about 50 percent for Egypt. About 50 percent of propensity to save by Turkish emigrants was 35
immigrants into Ghana and the Ivory Coast are percent in 1971 (compared to a gross domestic savemployed
in agriculture, usually as laborers. ings rate of 16 percent), and as high as 70 percent
Unskilled laborers in western Europe and the for Pakistanis in 1979 (compared to a gross domes-
United States may be more skilled than those in tic savings rate of less than 10 percent). The averthe
Middle East, but they comprised 30 percent of age propensity to remit, which may be more relemigrant
manual workers in Germany and more vant to the emigrant country, was lower, but still
than 40 percent of temporary workers admitted to 11 percent for workers from Turkey and about 50
the United States in recent years. Illegal workers in percent for workers from Pakistan.
the United States are largely uneducated and With this new source of income, the living standunskilled.
ards of many families improve significantly. A
In some countries emigration has contributed to large part of remittances (about 60 percent, accordsubstantial
increases in wages of the unskilled at ing to one survey in Pakistan) is spent on food,
home. For example, real wages of unskilled con- clothing, rent, and other standard household
struction labor in the largest cities of Pakistan items. Many of the consumer durables are
increased at an annual rate of more than 15 percent imported. Beyond using remittances to increase
a year between 1972 and 1978 (faster than the rate their current spending, families tend to repay debt
of growth of wages of carpenters or masons), after and invest their extra income, mostly in urban real
remaining stagnant for several previous years. In estate, and in agricultural land and housing. A surthe
Yemen Arab Republic, which experienced vey conducted in 1977 in the Indian state of Kerala
heavy international as well as rural-urban migra- showed that land and buildings accounted for an
tion, real wages of agricultural labor increased average 75 percent of the value of assets owned by
almost sixfold between 1972 and 1978. During emigrant households. In Pakistan 63 percent of
1975-79, they rose from 56 to 63 percent of urban investment from remittances went into real estate,
. wages; urban wages rose from 45 to 67 percent of including agricultural land; in Turkey 58 percent of
those in Saudi Arabia. In Egypt the rate of increase migrants' savings went into housing and land.
of real wages in construction was about 6 percent a Investment in equipment and financial assets has
* year during 1974-77, after stagnating in the pre- been relatively small, although in Mexico and Turvious
ten years. Considering the low wages that key some remittances have been invested in
the unskilled earn (for example, less than $2 a day family-owned commercial and manufacturing
in Pakistan in construction in 1977-78, less than $5 businesses. How remittances are used depends on
a day in Egypt in 1977), these wage increases must the same factors that determine other private conbe
considered beneficial, particularly since there is sumption and investment decisions.
no evidence that output declined. In short, emigration by the unskilled generally
An additional benefit is the money that emi- leads to no loss in production, and if there is a
grants send back home. It serves not only to scarcity premium on savings and foreign exchange
increase the incomes of their families but also to (generated from remittances), then net benefits
help finance their country's trade deficit. Workers' from emigration are likely to be large. In fact, it
remittances increased from about $3 billion in 1970 may even be beneficial for countries to facilitate
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