Questions and Answers for Panel 1:

Questions and Answers for Panel 1:
Pursuing Prosperity: Effects of Migration on Migrants and Families in Developing Economies
Q: Hi. Kathleen Newland from Migration Policy Institute. I have a question for Dean,
which is in the joint accounts being the most popular vehicle for savings, did anything in your
research suggest whether it was the transparency that was valuable to migrants versus control?
Q: (Inaudible) – Institute of International Economics, Germany. I’ve got a question to
Dean. Technically, if the inflows in savings account would not fall under many definitions of
remittances because they’re savings and not – of remittances when I withdraw money, the
question is: People who put money on their single accounts, how would they send the money
to their families? Because you know their remittances mostly are driven by family demands, so
– and what is the possibility to send the money from a single account to the family, to control it
in that way?
MR. MULLAINATHAN: Yeah, I agree that peer effects can be very, very large. I think
that it’s – the challenge is in finding a way to harness the peer effects, but I agree completely
with what you’re saying.
MR. YANG: So in the response to Kathleen’s question, so this is an excellent question:
whether the interest in the joint accounts was driven primarily by transparency, the ability to
monitor the account, versus the ability to control. I would have to say that the first – almost
certainly the effect that we’re seeing on demand for these joint accounts is driven by the fact
that migrants can monitor these accounts.
So I think in the first instance, it has to be the transparency that these accounts allow,
but it may be that the very transparency or the ability to monitor allows the migrant to control
how the money is accumulated in the accounts, and so – but it’s an indirect form of control
perhaps created by some future threat that the migrant will change his or her behavior, or start
saving on his or her own independently of the recipient. It’s not a direct control, but it’s a
control that’s engendered by the monitoring.
In terms of these – the question about whether we should think about savings as –
money going into savings accounts as remittances, the first response to that question is simply
that, you know, currently they are, in fact, being considered remittances. A large fraction of
remittances going into many developing countries actually goes directly into savings accounts
and they are being counted as remittances. Now, of course, you may want to be thinking about
them conceptually as distinct from remittances that are coming out in cash, but in the broad
encompassing term, they are remittances.
Your specific question was how would – if migrants did use these individual accounts
that we set up for the migrant themselves – and remember, we didn’t actually see much use of
these accounts, but if they – if we did – if they did use them, your question was how would
these monies have gone in – gotten to recipients eventually. And there wasn’t a direct easy
way for other recipients in El Salvador to get access to these funds.
I mean, there were designed specifically as savings accounts for the migrants
themselves. But, you know, there were ways to get the money out. The migrant could
withdraw them in the U.S. and then send the new remittance to the recipient. If they were
Internet savvy, they could actually do an online transfer between accounts, but we didn’t
actually expect that to be very important for many people.
Q: Hi, I’m Eleanor Brown. I’m the Lewis Fellow at Harvard Law School. I study Jamaican
guest workers, and I don’t know if this is picked up in any other research, but what happens in
Jamaica is that rather than remitting cash, a significant proportion of people pack what we call
barrels. They actually send the materials that they would like the people to use.
So if you are concerned that – and to whom you are sending money is not going to buy
the appropriate need for your baby, although it’s very inefficient, you pack a barrel of diapers
and baby formula and you send it to Jamaica. And that is your mechanism of ensuring that the
funds are being spent the way that you want them to be spent. And, you know, I don’t know if
any of this is being picked up in the data. Clearly it’s – you know, inefficient for a number of
ways, but I just wondered if anybody had a comment on that.
Q: Hi, I’m Paul – (inaudible). I work for the Center for Global Development here. My
question is to Lant. So your research shows that there are huge wage gaps and the implications
for policies that are marginally opening up labor markets to these people who would give huge
welfare gains.
My question is, to put it to the extreme, what are your thoughts on, say, a world where
we don’t have labor – I mean, we don’t have labor barriers. What are your thoughts on that
kind of policy?
MR. RATHA: A quick question. We are talking a lot about increasing savings. Why?
Why are we so concerned about increasing savings?
MR. KREMER: Thanks, Dilip. (Laughter.) Who would like to go respond first?
MR. YANG: I’m happy to start off. I think the anecdote about Jamaicans sending actual
physical goods back home at great cost is an amazing example and I think very much
representative of the same phenomenon that’s motivating our work among Salvadorans. I
think the broader phenomenon that you’re identifying is that migrants have very strong
preferences about how their remittances should be used or how their resources – their hardearned resources should be used. And I think I would interpret this Jamaican example that you
gave us migrants paying a very high price, a very high transaction cost to ensure that the funds
they’re sending are used as they would like them to be used.
And so I think that would just be, you know, a subset of the more general phenomenon
that is motivating our work among Salvadorans, and I think clearly a number of other
mechanisms for ensuring that funds are used in the way the migrants want the funds to be
used are emerging that aren’t nearly as high cost. So, for example, online retailers, for
example, in Kenya that allow Kenyan migrants, say, in Dallas or wherever they may be to
purchase a goat or a cow, or in some cases pay school fees for family members back home are
MR. PRITCHETT: Two things that are related. One, I could never quite – the answer to
the question about open borders – I can never quite tell what I’m doing, meaning, I’m confused
because one level I always want to say, look, look, I’m just concerned about at the margin,
right? At the margin, we’re going to devote a little extra resources to micro credit, a little extra
resources to funds for the World Bank, or a little extra overall effort to advocacy to relax
migration policies. What’s the optimal allocation at the margin? And that’s a good thing, I
think, and that’s how I mostly phrase it.
So I mostly don’t talk about “What if the world were an open place?” On the other
hand, I think in the long run, the world is going to be a very different place than in it is today,
but it’s not obvious how one gets there – whether promoting sort of the notion of a more open
world is actually counterproductive to achieving the marginal gains. So, you know, John Brown
– how do we feel about John Brown? And of course, since a lot of you are migrants, you’re not
going to have strong feelings about John Brown, but those who are the Americans in the room
probably kind of have thought about John Brown.
John Brown was an abolitionist and he wanted to end slavery, and as an abolitionist, he
was in favor of armed insurrection and he started an armed insurrection in West Virginia – what
is now West Virginia – and was executed as a traitor of the United States and was probably
counterproductive relative to the anti-slavery movement to have an actual armed insurrection
because it painted the rest of the anti-slavery movement as crazies.
But on the other hand, John Brown was executed in 1859. So two years later, people
were whistling John Brown’s body as a marching hymn as the country went to war, in a war
that eliminated slavery. So John Brown went from being completely crazy, loopy, radical for
preaching something that obviously could never exist because it would so deeply violate the
property rights of the people who had paid for slaves, to kind of, geez, it was obvious that men
shouldn’t be owned other men.
So one thing about savings though – and this is an important point – is I think there’s
two different things going on. One is Sendhil thing and one is the macro thing and we’re never
very clear as economist which we’re talking about. So Sendhil is saying individuals’ welfare
themselves could be made substantially higher by presenting them with a different side of
default options in structuring their choices. But without any necessarily having to be any macro
consequences for that to be important, right?
What we’re saying in a place premium is if the difference in country income is A, like some
intrinsic productivity of the country, then aggregate savings isn’t really that important anyway,
right? And so if a lot of the sort of cross-national differences are A and K doesn’t account for a
lot of it, then S into K into Y isn’t that big a deal anyway and we really should kind of need to
focus on the As, about which we don’t know a whole hell of a lot of. That was complete code to
all non-economists, sorry.