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© 2022 International Monetary Fund
WP/22/203
IMF Working Paper
Western Hemisphere Department
The Propensity to Remit: Macro and Micro Factors Driving Remittances to Central America and the Caribbean
Prepared by Hussein Bidawi, Paola Aliperti F. Domingues, Chiara Fratto, and Nicole Laframboise
Authorized for distribution by Nicole Laframboise
September 2022
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
ABSTRACT: In contrast to expectations, remittances to Central America and the Caribbean (CAC) surprised positively during 2020 and 2021. This study revisits the key macro indicators driving remittances, looks at the heterogeneous impacts of the global financial crisis (GFC) and COVID shocks, then uses micro data from the U.S. Current Population Census to examine individual features of immigrant households and how this might affect the “propensity to remit". The paper finds that remittance flows are responsive to both sending and receiving country economic conditions and that labor market conditions are particularly important determinants of remittance flows, explaining the unexpected jump in remittance flows in 2020-2021 and providing stronger predictive power when combined with income variables. Analysis of the micro data reinforces these findings, reflecting the existence of a family resource sharing model at play.
| JEL Classification Numbers: | F22, F24, O54. |
| Keywords: | Migrant remittances; covid-19 pandemic; global financial crisis; elasticities. |
| Author’s E-Mail Address: | HBidawi@imf.org, PAlipertiFrancaDom@imf.org, CFratto@imf.org, NLaframboise@imf.org, |
| JEL Classification Numbers: | F22, F24, O54. |
| Keywords: | Migrant remittances; covid-19 pandemic; global financial crisis; elasticities. |
| Author’s E-Mail Address: | HBidawi@imf.org, PAlipertiFrancaDom@imf.org, CFratto@imf.org, NLaframboise@imf.org, |
Title Page
WORKING PAPERS
The Propensity to Remit: Macro and Micro Factors Driving Remittances to Central America and the Caribbean
Prepared by Hussein Bidawi, Paola Aliperti F. Domingues, Chiara Fratto, and Nicole Laframboise
Contents
Introduction
Some Literature
Data
Demographic Characteristics of Immigrants and Remittances
Education Characteristics of Immigrants from CAC
Labor Markey Features of Immigrants from CAC
Additional Features of Remitters
Source Country Factors Affecting Remittance Flows
Results
COVID-19 vs. The GFC Shock: Remittances Response
Individual Features that Affect Propensity to Remit Funds
All Migrants
Results
Migrants from Haiti, the Caribbean, and Central America
Conclusions and Policy Considerations
References
Appendix on Summary Statistics
FIGURES
1. Remittance Flows to CAC
2. Labor Market Conditions of Immigrants in the US by Country of Origin
3. Labor Market Conditions of Immigrants in the US by Country of Origin
4. Likelihood to Remit and Remitter’s Characteristics
5. Likelihood to Remit and Amounts Sent by Remitters
6. Characteristics of Remitters
7. Household Income during COVID and the Global Financial Crisis, Index
8. Impact of the Pandemic on Receiving Country Relative to the US
9. Correlation between Growth in Remittances and Macroeconomic Variables
TABLES
1. The Role of GDP Growth in the Sending and Receiving Country
2. The Role of Family Income of Remitters
3. The Role of Unemployment Rate Differences and GDP Growth Differences
4a. All Migrants
4b. All Migrants
5a. Migrants from Haiti, the Caribbean, and Central America
5b. Migrants from Haiti, the Caribbean, and Central America
We are grateful to Yorbol Yakhshilikov for comments. We thank all the relevant country teams in the IMF’s Western Hemisphere Department for timely provision of updated remittance data. Thanks to Grey Ramos for his excellent assistance. All errors of the paper are those of the authors.