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					International Migration




                          1
International migration: the basic numbers


   • Between 1965 and 2000, the fraction of people living outside
     their countries of birth increased from 2.2% to 2.9% of world
     population
      – 175 million people in 2000

   • Remittances have been huge and growing




 Sources: UN International Migration Report 2002, US Census Bureau.
                                                                      2
Remittances vs. ODA, FDI
(1991-2005)




 Source: World Development Indicators 2007. Data are in current US$.

                                                                       3
Key questions




   • How does emigration to the rich world affect the economic
     outcomes of migrants themselves?

   • How does emigration to the rich world affect families left
     behind, and origin-country economies more broadly?

   • What policies might help raise the development impact of
     remittances?




                                                                  4
Clemens and Pritchett (2008)

  •   A new statistic, income per natural: the mean annual income of
      persons born in a given country, regardless of where that person now
      resides

  •   Almost 43 million people live in a group of countries whose income
      per natural collectively is 50% higher than GDP per resident
       – For 1.1 billion people the difference exceeds 10%

  •   Poverty estimates are very different for national residents and
      naturals
       – 26 percent of Haitian naturals who are not poor by the two-
          dollar-a-day standard live in the United States

  •   “If economic development is defined as rising human well being, then
      a residence-neutral measure of well-being emphasizes that crossing
      international borders is not an alternative to economic development,
      it is economic development.”



                                                                           5
Table 2b




           6
Table 2b




           7
Causal effect of migration

  • But what is the causal effect of migration?

  • Observed income differences could reflect:
     – Labor-supply effect
     – Selection effect
     – Causal effect of migration

  • Clemens and Pritchett (2008) review a variety of
    studies finding that at least 75% of the income
    difference is the causal effect of migration

  • Next: examine one important study providing
    estimated causal impact of migration on income:
     – Gibson, McKenzie, and Stillman (2006)

                                                       8
Gibson, McKenzie, and Stillman (2006)

  •   What is the impact of migration on the migrants?
       – One of the most difficult problems in migration studies, due to
         selectivity of migration
       – Very difficult to find an appropriate or convincing control group

  •   This paper: use a lottery to obtain exogenous variation in migration
       – Lottery for Tongans to migrate to New Zealand

  •   Estimate income gains from migration, using lottery as exogenous
      variation

  •   Compare estimates from lottery to OLS, single-difference, double-
      difference, IV, propensity score matching

  •   Results: IV with a “good” instrument performs best
       – D-in-D and propensity score matching do OK as well



                                                                             9
Table 3




          10
Table 4




          11
Table 5




          12
Table 6




          13
Key questions




   • How does emigration to the rich world affect the economic
     outcomes of migrants themselves?

   • How does emigration to the rich world affect families left
     behind, and origin-country economies more broadly?

   • What policies might help raise the development impact of
     remittances?




                                                                  14
Yang (2008)

  • What are impacts on families left behind?
     – Specifically, what do remittances help pay for at home?

  • Another natural experiment
     – June 1997: 6% of households in the Philippines had one
       or more members working overseas, in dozens of
       countries

  • July 1997: Asian financial crisis occurs
     – Large, sudden, heterogeneous changes in exchange rates
        in many locations of Filipino workers (see figure)
     – Philippine peso also depreciates

  • Examine impact of migrant exchange rate shocks on
    Philippine households


                                                                 15
Distribution of Overseas Workers from Philippines
(June 1997)
            Korea, Rep.
                2%

               Greece        Other
                 2%          16%
                                                       Saudi Arabia
          United Arab                                     29%
            Emirates
               3%

              Kuw ait
               3%

                  Italy
                   3%
                                                           Hong Kong, China
              Malaysia                                           11%
                4%
                                                 Taiw an
                                     Singapore
             United States                         8%
                                        7%
                  6%

                          Japan
                           6%
                                                                              16
Exchange rates over time
                                                                      Exchange Rates in Selected Locations of Overseas Filipinos (Jul 1996 - Oct 1998)
Philippine pesos per unit of foreign currency (July 1996 = 1)




                                                                1.7
                                                                                                                                                                                                                                                                                                      US,
                                                                                                                                                                                                                                                                                                      Hong Kong,
                                                                1.6
                                                                                                                                                           Start of                                                                                                                                   Saudi Arabia,
                                                                                                                                                            Asian                                                                                                                                     Kuwait
                                                                1.5
                                                                                                                                                          financial
                                                                                                                                                            crisis                                                                                                                                    Japan
                                                                1.4                                                                                     (July 1997)
                                                                                                                                                                                                                                                                                                      Singapore
                                                                1.3                                                                                                                                                                                                                                   Taiwan

                                                                1.2

                                                                1.1
                                                                                                                                                                                                                                                                                                      Malaysia
                                                                 1
                                                                                                                                                                                                                                                                                                      Korea
                                                                0.9

                                                                0.8

                                                                0.7
                                                                              Aug96




                                                                                                                                                                              Aug97




                                                                                                                                                                                                                                                                              Aug98
                                                                      Jul96




                                                                                      Sep96




                                                                                                                              Feb97




                                                                                                                                                              Jun97

                                                                                                                                                                      Jul97




                                                                                                                                                                                                                                                                      Jul98
                                                                                                                                                                                      Sep97




                                                                                                                                                                                                                              Feb98




                                                                                                                                                                                                                                                              Jun98




                                                                                                                                                                                                                                                                                      Sep98
                                                                                                      Nov96




                                                                                                                      Jan97




                                                                                                                                      Mar97

                                                                                                                                              Apr97

                                                                                                                                                      May97




                                                                                                                                                                                                      Nov97




                                                                                                                                                                                                                      Jan98




                                                                                                                                                                                                                                      Mar98
                                                                                                              Dec96




                                                                                                                                                                                                              Dec97




                                                                                                                                                                                                                                              Apr98

                                                                                                                                                                                                                                                      May98
                                                                                              Oct96




                                                                                                                                                                                              Oct97




                                                                                                                                                                                                                                                                                              Oct98
                                                                                                                                                                              Month



                                                                                                                                                                                                                                                                                                              17
               Figure 1: Impact of migrant exchange rate shocks on Philippine household remittance receipts (1997-1998)



                 20% 40% 60% 80%                                                                                                    GBR




                                                                                                                             HKG

                                                                                                                ITA
                            Percent change in mean remittances




                                                                                                                              USA
                                                                                                 SGP                  CAN     SAU
                                                                   MY S                                                     KWT
                                                                                           TAI   GRC NOR                      MNP
                                  0%




                                                                                                                              BHR
                                                                                                                             ARE
 -80% -60% -40% -20%




                                                                                                     JPN                      QAT




                                                                                                 BRN
                                                                 KOR
                                                                                        AUS


                                                                       0%   10%   20%            30%                 40%    50%           60%
                                                                                   Percent change in exchange rate

NOTES–Exchange rates are in Philippine pesos per unit of foreign currency. Percent change in exchange rate is mean exchange rate from Oct 1997 to
Sep 1998 minus mean exchange rate from July 1996 to June 1997, divided by the latter. Mean remittances are calculated among all households with a
                                                                                                                                                18
single migrant in given overseas location. Percent change in mean remittances is between Jan - Jun 1997 and Apr-Sep 1998 reporting periods. Datapoints
are the top 20 locations of Philippine overseas workers (as listed in Table 1).
Impact of migrant shocks on households
                                                                                Impact of 25% improvement in migrant's
   Outcome                                              Value prior to crisis   exchange rate vs. Philippine Peso

   Remittances                                          40% of household        Increases by 6.0 percentage points
                                                        income

   Probability of being below poverty line              9% of households        Declines by 1.5 percentage points

   Educational expenditures                             5.4% of household       Increases by 0.7 percentage points
                                                        income

   Probability of attending school (ages 10-17)
    Girls                                               95%                     Increases by 3.3 percentage points
    Boys                                                93%                     Increases by 1.7 percentage points

   Average hours worked per week (ages 10-17)
    Girls                                               0.64                    Declines by 0.54 hours/week
    Boys                                                1.53                    Declines by 0.81 hours/week

   Total hours worked in self-employment by household   21.5                    Increases by 2.5 hours
   members (per week)

   Probability of owning a:
    Television                                          83%                     Increases by 2.4 percentage points
    Living room set                                     68%                     Increases by 1.5 percentage points
    Vehicle (jeep, motorcycle, or car)                  13%                     Increases by 3.6 percentage points

                                                                                                                     19
Key questions




   • How does emigration to the rich world affect the economic
     outcomes of migrants themselves?

   • How does emigration to the rich world affect families left
     behind, and origin-country economies more broadly?

   • What policies might help raise the development impact of
     remittances?




                                                                  20
Raising development impact of remittances

  • An open area

  • Increasing migrant control over remittance uses
     – El Salvador Study of Migrant Families

  • Remittances for microenterprise finance
     – Migrant-backed loans
     – Migrant co-signed loans

  • Other ideas?




                                                      21
Intro slide




              Remittances and The Problem of Control:
              A Field Experiment Among Migrants from
                             El Salvador


                    Nava Ashraf, Harvard Business School

                Diego Aycinena, Francisco Marroquin University

                     Claudia Martinez, University of Chile

                      Dean Yang, University of Michigan

                                                                 22
DC-area Salvadorans on the problem of control


   “I have many uncles and they get drunk, so I just send money
   when needed, or I send to someone like my sister who I trust.”
          Male, 34 years old, 8 months in the U.S., works as
          roofer

   “The brother of my boss sent around $50,000 to his mother
   over the years. When he thought he had enough money to
   build a house, he asked his mom for the money. She said she
   didn't have it. She had lent it to an uncle. When he asked for
   the money back, the uncle threatened to kill him if he came
   back to El Salvador for the money.”
           Male, 30 years old, 1 year in the U.S., works as a
           carpenter




                                                                    23
Some open questions about remittances

  • Do migrants and recipients typically agree on the uses to
    which remittances should be put?

  • If not, how do such disagreements affect…
     – the choice of remittance recipients?
     – amounts remitted?
     – remittance uses?

  • If migrants were to be given more control over remittance
    uses…
     – would they remit more?
     – how would they direct them to be used?
     – what would be the impact on household-level
        development outcomes?



                                                                24
Remittances and savings

  • This research focuses on the control that migrants have over
    how much of remittances are saved

  • Migrants frequently report wanting household to save some
    fraction of remittances
     – Savings potentially intended for use of either recipient or
        migrant

  • Migrants report stronger preferences that remittances be
    saved, compared to recipients

  • Migrants have little or no ability to control or monitor
    household savings in El Salvador
     – Can only request that household save a portion of cash
       received




                                                                 25
Why would migrants save in home country?


  • If savings intended for regular use of family back home,
    U.S.-based accounts are inconvenient

  • If savings intended for U.S.-based migrant, many migrants
    consider U.S. savings insecure
     – Undocumented migrants fear they would lose savings in
        the U.S. if they were deported

  • Currently an open question whether savings accounts are
    primarily for recipients’ or migrants’ use




                                                                26
The experiment

 • We offered Salvadoran migrants in Washington, D.C. the
   ability to directly channel remittances into savings accounts
   in El Salvador
    – Facilities developed for project in partnership with
       Salvadoran bank, previously not widely available

 • We randomly varied the degree of migrant control over
   accounts offered

 • Outcomes of interest:
    – Demand for accounts (take-up)
    – Savings accumulation
    – Remittances (identity of recipients, amounts)
    – Later household outcomes
       • E.g., consumption, schooling, entrepreneurial
         investment, housing

                                                                   27
Theoretical impacts
  • How should remittances change if migrants had more control
    over savings in the home country?

  • Case 1: funds saved out of remittances intended for use of
    recipient household
     – If migrant and recipient have similar savings preferences,
        increasing migrant control should have little or no effect
     – If migrants prefer recipient to save more, then increasing
        migrant control should lead to higher remittances and
        savings

  • Case 2: funds saved out of remittances intended for use of
    remitter (migrant)
     – Funds entrusted to remittance recipient, but monitoring is
       imperfect: a principal-agent problem
     – Increasing migrant control over savings could lead to
       higher savings (by migrant), but lower remittance flows to
       family
Treatments
  0. Control group
      – Migrants encouraged to remit into a household member’s bank
         account, but no account-opening assistance provided

  1. Account for remittance recipient in El Salvador
      – Migrants encouraged to remit into an individual’s bank account
      – If no such account exists, offer to help household set up account
      – Migrant cannot check balance or withdraw

  2. Joint account (for migrant and household)
       – Migrants encouraged to remit into shared account
       – New product: “Cuenta Unidos”
       – Migrant and hh each have ATM cards; migrant can check balance

  3. Individual migrant account
       – Migrants encouraged to remit into own account
       – New product: “Ahorro Directo”
       – Only migrant has ATM card
       – Not shared with household
Marketing brochures

       Ahorro Directo   Cuenta Unidos




                                        30
Rationales for treatment conditions

  0. Control group: Provides counterfactual for assessing impact of offered
     savings facilities on later household outcomes (savings, remittances,
     consumption, investment, etc.)

  1. Account for remittance recipient: Provides counterfactual of demand
     for accounts where migrants have no control
      – If no differences vs. 2 and 3, indicates migrants don’t value
         control


  2. Joint account (for migrant and household): Impact of having shared
      control over account
       – Monitoring of account balance
       – Shared ownership
       – But El Salvador joint owner has full ability to withdraw

  3. Individual migrant account: Impact of exclusive control over account
Hypotheses to be tested
  • Hypothesis 1: Take-up of new savings products will be…
     – Highest for Treatment 3 (individual migrant account)
     – Next-highest for Treatment 2 (joint account)
     – Lowest for Treatment 1 (account for remittance recipient)
     – Difference should reflect value migrants place on control
       over savings

  • Hypothesis 2: Growth in migrant savings will be…
     – Highest for Treatment 3
     – Next-highest for Treatment 2
     – Next-highest for Treatment 1
     – Smallest for Treatment 0

  • In later rounds, will examine effects on other household
    investment activities, such as schooling, health spending,
    entrepreneurship
Overview of treatment protocols
 •   Migrants recruited at Salvadoran consulates and Banagricola
     remittance agencies
      – Must have remitted to someone in El Salvador in last 12 months,
         and have been in U.S. for <15 years
      – Subsample of migrants and recipient households administered
         comprehensive baseline survey

 •   Migrants randomly assigned to one of 4 experimental conditions
      – After stratification by gender, US account status, years in US (3
         categories), and relationship to recipient (4 categories)

 •   Marketing team member visits each migrant in person to administer
     treatment

 •   Visits take place in location of migrant’s choice
      – Typically: home, workplace, restaurant, nearest Banagricola
          agency
      – Some visits arranged in advance, others occur on the spot

                                                                            33
ESSMF marketing team




                       34
Marketing visit (1)




                      35
Marketing visit (2)




                      36
Equalizing transaction costs

  • Account-opening costs
     – For all account types, account opening requires visit by
       remittance recipient to a Banco Agricola branch in El
       Salvador

  • Remittance transfer cost
     – All accounts have equal cost of inbound remittance
     – Inbound remittance costs also equalized with cash
       remittance




                                                                  37
Remittance price randomization

  • Remittance prices randomized between $4 and $9
     – For a remittance up to $1500
     – VIP card used to track remittances

  • Will examine price elasticity of remittances




                                                     38
Baseline survey contents

 • Demographics, household composition

 • Employment and income

 • Detailed consumption in US and El Salvador

 • Use of financial services
    – Savings
    – Remittances
    – Credit

 • Financial literacy, planning

 • Communication and conflict with family

 • Migration history
                                                39
Migrant survey – Washington DC




                                 40
Household survey – El Salvador




                                 41
Basic summary statistics

  • Demographics
     – 29% female
     – Mean age: 30.8
     – Mean years in US: 5.47

  • Employment and income
     – Top employment categories are construction (32%), food
       services (15%), cleaning services (10%)
     – For migrant, median annual earnings is $17,945 for
       surveyed individual and $25,458 for household
     – For recipient household, median annual income: $2,864

  • Remittances
     – Most common remittance amount sent: $200 (25%)
     – Median annual remittances: $3,900
     – Median remittances as share of migrant hh income:
       14.4%                                                42
Sources of income in recipient households
                                   Other
                     Agriculture
                                    6%
                         2%
       Entrepreneurship
             6%




      Wages
      15%




                                           Remittances
                                              72%




                                                         43
Communication with family

  • 86% of migrants have a cellphone

  • 94% of migrants have not visited in the past 3 years (proxy
    for legal status)

  • 81% of migrants communicate at least once a week




                                                              44
Methods of communicating with family

                         LettersEmail Other
                           1% 1%       1%




        Landline phone
             22%




                                              Cellphone
                                                75%




                                                          45
Savings: migrant

  • 69% have a savings account
     – 51% have one in US only
     – 9% have one in El Salvador only
     – 9% have one in both countries

  • But savings are quite low for most migrants
     – Median savings: $700
     – Median savings as % of annual hh income: 2.8%

  • Migrants express desire for more savings
     – 37% “very unsatisfied” or “unsatisfied” with current level
       of savings
     – 85% would open account in El Salvador if given
       opportunity to do so



                                                                46
Savings: recipient household

  • Only 21% have a savings account

  • Savings are low
     – Median savings: $0 (mean savings: $301)




                                                 47
Revealing preferences for remittance uses

  • Goal: Reveal via survey answers whether migrants and
    households differ in their preferences over how remittances
    are used

  • Problem: simply asking migrants and households about their
    expenditure preferences may not yield useful answers
     – Answers may be automatic, conditioned by what
       respondents think is the “right” answer
     – Respondents may not think carefully (in way they would if
       actual money were at stake)

  • Our approach: enter respondents into a “remittance raffle”
     – Winning family in El Salvador will receive remittance of
       $100
     – Migrants specify how they would like the money to be
       used by recipients
     – Household respondent specifies how they would like the
       money to be used when received
     – 13 categories of expenditures
     – “Cash” is not an option
Raffle use categories

 •   Daily consumption
 •   Clothing
 •   Housing (includes rent, construction, mortgage)
 •   Medical expenditures
 •   Educational expenses
 •   Utilities bills
 •   Phone bills
 •   Agricultural inputs
 •   Small business expenses
 •   Savings
 •   Durable goods
 •   Automobile payments
 •   Other (specify)

 Question: Do migrants allocate more money to certain
   expenditures than the corresponding remittance-receiving
   households?
   Allocations of $100 raffle winnings



  Small      Agricultural Durable
                 Phone                 Automobile
business         inputs
                  bills    goods        payments
expenses         0.25%
                 1.36%    0.41%          0.08%
 2.93%                         Other
 Utilities bills              6.37%
   3.36%
Educational
 expenses
  4.07%

                                               Daily
             Medical                        consumption
           expenditures                       43.96%
              9.01%


 Housing
 3.79%
              Clothing
               6.91%


                             Savings
                             17.49%




                             Migrant

                                                          50
   Allocations of $100 raffle winnings



                AgriculturalDurable      Automobile          Small        Phone DurableAutomobile   Agricultural
  Small           inputs     goods        payments         business        bills goods payments       inputs
business          0.25% 0.41%              0.08%           expenses      0.55% 1.11% 0.00%            0.35%
expensesPhone bills
                                 Other                      1.00%                          Other
 2.93% 1.36%                    6.37%                                                      4.92%
Utilities bills                                            Utilities bills
   3.36%                                                      3.53%

Educational                                                Educational
 expenses                                                   expenses
  4.07%                                                      6.26%
                                                Daily                   Medical
             Medical                         consumption              expenditures
           expenditures                        43.96%                    7.83%
              9.01%                                        Housing
                                                           2.18%                                                Daily
                                                                      Clothing                               consumption
 Housing
                                                                       6.05%                                   63.76%
 3.79%
               Clothing
                6.91%
                                                                 Savings
                                                                 2.45%
                              Savings
                              17.49%




                               Migrant                                       Remittance recipient

                                                                                                                   51
Migrant vs. household raffle winnings allocation (US$)

 Raffle use categories         Migrant (in    Remittance       Difference     P-value: test
                                 U.S.)       Recipient (in   (migrant minus   of equality of
                                             El Salvador)       recipient         means
                                                               allocation)

 Daily consumption               43.96          63.76            -19.80           0.000
 Savings                         17.49           2.45             15.04           0.000
 Clothing                         6.91           6.05              0.86           0.296
 Housing                          3.79           2.18              1.61           0.013
 Medical expenditures             9.01           7.83              1.18           0.235
 Educational expenses             4.07           6.26             -2.19           0.003
 Utilities bills                  3.36           3.53             -0.17           0.785
 Small business expenses          2.93           1.00              1.93           0.001
 Phone bills                      1.36           0.55              0.81           0.023
 Agricultural inputs              0.25           0.35             -0.10           0.638
 Durable goods                    0.41           1.11             -0.70           0.041
 Automobile payments              0.08           0.00              0.08           0.318
 Other (specify)                  6.37           4.92              1.46           0.103

                   Num. obs.     1,208          1,208
Balance across treatment groups




                                  53
Analysis of take-up decision

  • Definition of “take-up”: migrant fills out account-opening
    forms during marketing visit

  • Focus on migrants offered Treatments 1, 2, or 3
     – Account opening for Treatment 0 requires analysis of
       internal bank data or follow-up survey




                                                                 54
Percentage opening accounts, by treatment

              60%

                                                                                   53.1%

              50%                                       47.8%



              40%

                              33.1%

              30%




              20%




              10%




               0%
                     Treatment 1: Remittance Treatment 2: Joint account Treatment 3: Joint account
                      recipient account only      (Cuenta Unidos)           (Cuenta Unidos) +
                                                                        individual account (Ahorro
                                                                                 Directo)


 •   Percentages of migrants filling out account-opening forms as of May 19, 2008 (236 treatment 1, 253
     treatment 2, and 243 treatment 3)
                                                                                                          55
Regression specification


  • For migrant i :

          Yi = a + b Z2i + g Z3i + Xi’f + εi

     –   Yi = takeup indicator
     –   Z2i = treatment 2 indicator
     –   Z3i = treatment 3 indicator
     –   Xi = vector of control variables (collected at
         baseline)
Impact of treatments on account opening
 Dependent variable: Migrant filled out account-opening forms during marketing visit

                                          (1)          (2)           (3)         (4)

 Treatment 2 (joint account)              0.148***     0.148***      0.169***    0.172***
                                          (0.044)      (0.044)       (0.060)     (0.060)
 Treatment 3 (joint account               0.200***     0.196***      0.149**     0.150**
   + indiv. migrant account)              (0.045)      (0.044)       (0.060)     (0.061)
 Constant                                 0.331***     0.445***      0.472***    0.759***
                                          (0.032)      (0.046)       (0.061)     (0.192)


 Controls for stratification variables                 Y             Y           Y
 Additional migrant, recipient controls                                          Y

 Observations                             732          732           408         408
 R-squared                                0.028        0.078         0.055       0.085

 P-value of F-test of equality of         0.234        0.275         0.742       0.716
    Treatment 2 and 3 coefficients
                                                                                            57
 * significant at 10%; ** significant at 5%; *** significant at 1%
Impact of treatments on account opening
 Dependent variable: Migrant filled out account-opening forms during marketing visit

                                          (1)          (2)           (3)         (4)

 Treatment 2 (joint account)              0.148***     0.148***      0.169***    0.172***
                                          (0.044)      (0.044)       (0.060)     (0.060)
 Treatment 3 (joint account               0.200***     0.196***      0.149**     0.150**
   + indiv. migrant account)              (0.045)      (0.044)       (0.060)     (0.061)
 Constant                                 0.331***     0.445***      0.472***    0.759***
                                          (0.032)      (0.046)       (0.061)     (0.192)


 Controls for stratification variables                 Y             Y           Y
 Additional migrant, recipient controls                                          Y

 Observations                             732          732           408         408
 R-squared                                0.028        0.078         0.055       0.085

 P-value of F-test of equality of         0.234        0.275         0.742       0.716
    Treatment 2 and 3 coefficients
                                                                                            58
 * significant at 10%; ** significant at 5%; *** significant at 1%
Impact of treatments on account opening
 Dependent variable: Migrant filled out account-opening forms during marketing visit

                                          (1)          (2)           (3)         (4)

 Treatment 2 (joint account)              0.148***     0.148***      0.169***    0.172***
                                          (0.044)      (0.044)       (0.060)     (0.060)
 Treatment 3 (joint account               0.200***     0.196***      0.149**     0.150**
   + indiv. migrant account)              (0.045)      (0.044)       (0.060)     (0.061)
 Constant                                 0.331***     0.445***      0.472***    0.759***
                                          (0.032)      (0.046)       (0.061)     (0.192)


 Controls for stratification variables                 Y             Y           Y
 Additional migrant, recipient controls                                          Y

 Observations                             732          732           408         408
 R-squared                                0.028        0.078         0.055       0.085

 P-value of F-test of equality of         0.234        0.275         0.742       0.716
    Treatment 2 and 3 coefficients
                                                                                            59
 * significant at 10%; ** significant at 5%; *** significant at 1%
Breakdown of accounts in Treatment 3
                                                 Joint account only
                                                         3%




                                                                                        No account
                                                                                           47%


        Joint + indiv.
       migrant account
            50%




                                                                                                     60
Percentages out of 129 individuals opening accounts in Treatment 3 as of May 19,2008.
Other correlates
of account         Dependent variable: Migrant filled out account-opening forms during marketing
                   visit
opening
                   Treatment 2 (joint account)                   0.148***
                                                                 (0.044)
                   Treatment 3 (joint account                    0.196***
                    + indiv. migrant account)                    (0.044)
                   Migrant is female                             -0.054
                                                                 (0.040)
                   Migrant has US bank account                   -0.055
                                                                 (0.039)
                   Migrant has been in US 6-10 years             -0.129***
                                                                 (0.041)
                   Migrant has been in US 11-15 years            -0.289***
                                                                 (0.059)
                   Recipient is migrant's spouse                 0.010
                                                                 (0.058)
                   Recipient is migrant's child                  0.051
                                                                 (0.087)
                   Recipient is migrant's other relative         0.048
                                                                 (0.040)
                   Constant                                      0.445***
                                                                 (0.046)

                   Observations                                  732
                   R-squared                                     0.078

                   P-value of F-test of equality of              0.275
                      Treatment 2 and 3 coefficients

                   * significant at 10%; ** significant at 5%; *** significant at 1%
                                                                                                   61
Other correlates
of account
             Dependent variable: Migrant filled out account-opening forms during marketing visit
opening (2)
                        Treatment 2 (joint account)             0.172***                    Migrant's years of education               0.003
                                                                (0.060)                                                                (0.005)
                        Treatment 3 (joint account              0.150**                     Migrant's raffle allocation to savings     0.000
                         + indiv. migrant account)              (0.061)                                                                (0.001)
                        Migrant is female                       -0.037                      Migrant plans for retirement               0.060
                                                                (0.059)                                                                (0.054)
                        Migrant has US bank account             -0.028                      Log (migrant's annual income)              -0.009
                                                                (0.053)                                                                (0.013)
                        Migrant has been in US 6-10 years       -0.116**                    Recipient's years of education             0.001
                                                                (0.055)                                                                (0.005)
                        Migrant has been in US 11-15 years      -0.195**                    Recipient's raffle allocation to savings   0.000
                                                                (0.091)                                                                (0.002)
                        Recipient is migrant's spouse           0.035                       Recipient plans for retirement             0.051
                                                                (0.088)                                                                (0.076)
                        Recipient is migrant's child            0.112                       Log (recipient's hh income)                -0.031*
                                                                (0.142)                                                                (0.018)
                        Recipient is migrant's other relative   0.093                       Recipient has bank account                 -0.163**
                                                                (0.058)                                                                (0.067)
                        Constant                                0.759***
                                                                (0.192)


                        Observations                            408
                        R-squared                               0.085

                        P-value of F-test of equality of        0.716
                           Treatment 2 and 3 coefficients
                                                                                                                                       62
                        * significant at 10%; ** significant at 5%; *** significant at 1%
Evidence for migrant control?

  • Higher take-up in Treatment 2 and 3 vs. 1 may indicate:
     – Migrant desire for control, or
     – Migrant desire for convenience (easy access to funds from
       U.S.)

  • Take-up is not statistically significantly higher in Treatment 3
    vs. 2

  • But 95% of migrants opening accounts in treatment 3 open
    Ahorro Directo (individual migrant account)
     – Highly suggestive of migrant desire for control

  • Data still to come will shed further light: assess whether total
    savings balances are significantly higher in Treatment 3 vs. 2




                                                                   63
Heterogeneity
in treatment
effect          Dependent variable: Migrant filled out account-opening forms during marketing visit

                Treatment 2 or 3                                           0.309***
                                                                           (0.080)
                (T. 2 or 3) * Migrant has US bank account                  -0.148*
                                                                           (0.085)
                (T. 2 or 3) * Migrant is female                            0.082
                                                                           (0.085)
                (T. 2 or 3) * Migrant has been in US 6-10 years            -0.144
                                                                           (0.088)
                (T. 2 or 3) * Migrant has been in US 11-15 years           0.115
                                                                           (0.128)
                (T. 2 or 3) * Recipient is migrant's spouse                -0.024
                                                                           (0.128)
                (T. 2 or 3) * Recipient is migrant's child                 0.034
                                                                           (0.176)
                (T. 2 or 3) * Recipient is migrant's other relative        -0.102
                                                                           (0.086)

                Observations                                               732
                R-squared                                                  0.093

                * significant at 10%; ** significant at 5%; *** significant at 1%

                                                                                                      64
Heterogeneity
in treatment    Dependent variable: Migrant filled out account-opening forms during marketing visit

effect (2)                                                                  (2)        (3)

                Treatment 2 or 3                                            0.302***   0.247**
                                                                            (0.106)    (0.116)
                (T. 2 or 3) * Migrant has US bank account                   -0.225**
                                                                            (0.113)
                (T. 2 or 3) * Migrant has US bank account only                         -0.110
                                                                                       (0.128)
                (T. 2 or 3) * Migrant has ES bank account only                         0.187
                                                                                       (0.187)
                (T. 2 or 3) * Migrant has both US and ES bank account                  -0.458**
                                                                                       (0.198)
                (T. 2 or 3) * Migrant is female                             0.010      0.022
                                                                            (0.118)    (0.118)
                (T. 2 or 3) * Migrant has been in US 6-10 years             -0.054     -0.065
                                                                            (0.118)    (0.118)
                (T. 2 or 3) * Migrant has been in US 11-15 years            0.308      0.257
                                                                            (0.202)    (0.204)
                (T. 2 or 3) * Recipient is migrant's spouse                 -0.160     -0.146
                                                                            (0.186)    (0.188)
                (T. 2 or 3) * Recipient is migrant's child                  -0.104     -0.127
                                                                            (0.268)    (0.269)
                (T. 2 or 3) * Recipient is migrant's other relative         0.001      0.008
                                                                            (0.117)    (0.117)


                Observations                                                408        408
                R-squared                                                   0.075      0.089
                                                                                                      65
                * significant at 10%; ** significant at 5%; *** significant at 1%
Heterogeneity in treatment effect (3)

  Dependent variable: Migrant filled out account-opening forms during marketing visit

  Treatment 2 or 3                                         0.032
                                                           (0.391)
  (T. 2 or 3) * Migrant has US bank account only           -0.064     (T. 2 or 3) * Migrant's raffle allocation to savings   -0.000
                                                           (0.135)                                                           (0.001)
  (T. 2 or 3) * Migrant has ES bank account only           0.194      (T. 2 or 3) * Migrant plans for retirement             0.023
                                                           (0.197)                                                           (0.120)
  (T. 2 or 3) * Migrant has both US and ES bank account -0.432**      (T. 2 or 3) * Log (migrant's annual income)            -0.007
                                                        (0.205)                                                              (0.027)
  (T. 2 or 3) * Migrant is female                          0.029      (T. 2 or 3) * Recipient's years of education           -0.006
                                                           (0.128)                                                           (0.012)
  (T. 2 or 3) * Migrant has been in US 6-10 years          -0.082     (T. 2 or 3) * Recipient's raffle allocation to savings 0.003
                                                           (0.123)                                                           (0.004)
  (T. 2 or 3) * Migrant has been in US 11-15 years         0.188      (T. 2 or 3) * Recipient plans for retirement           0.258
                                                           (0.212)                                                           (0.165)
  (T. 2 or 3) * Recipient is migrant's spouse              -0.119     (T. 2 or 3) * Log (recipient's hh income)              0.025
                                                           (0.202)                                                           (0.038)
  (T. 2 or 3) * Recipient is migrant's child               0.000      (T. 2 or 3) * Recipient has bank account               0.053
                                                           (0.303)                                                           (0.153)
  (T. 2 or 3) * Recipient is migrant's other relative      0.057
                                                           (0.130)
  (T. 2 or 3) * Migrant's years of education               0.002
                                                           (0.012)

  Observations                                             408
  R-squared                                                0.128

  * significant at 10%; ** significant at 5%; *** significant at 1%                                                                    66
Summary of findings so far

 • Migrant demand for savings accounts in El Salvador rises
   when they are offered more possibility of control over them
    – Demand is 60% higher when migrants have option of
      joint or individual (migrant) ownership over accounts,
      compared to accounts in the name of someone else in El
      Salvador

 • Increase in take-up when migrants are additionally offered
   option of individual ownership (vs. joint ownership) is
   relatively small
    – But when individual ownership is offered, 95% of
       migrants opening accounts avail of individual ownership
    – Highly suggestive of demand for migrant control

 • Additional tests of importance of migrant control await
   availability of savings data

                                                                 67
To be continued…

  • Marketing visits to offer products are continuing through July
    2008

  • Savings and remittance data will be available in fall 2008

  • Follow-up survey in early-mid 2009
     – Examine effects on remittances, savings, consumption,
        investments (education, small enterprises), etc.




                                                                 68
Extra slides




               69
Principal-agent problem: outline

 •   Remittances have two functions: 1) funds for investment by migrant
     (principal), and 2) incentive payments for hh (agent)

 •   Migrant sends funds for investment k, and hh chooses fraction f that
     is spent in investment (consuming remainder)
       – Household must conceal consumption of uninvested funds at cost
          c(f)

 •   Investment returns have random component, and migrant cannot
     observe f, only total investment returns x
      – Problem for migrant is how to reduce diversion of funds by hh
      – Migrant implements incentive scheme for hh based on returns x;
         payments to hh are s(x)

 •   Prediction: ability to directly control investments (e.g., savings,
     housing, education) raises remittances-as-investment (k) but
     reduces payments to hhs (s)
      – Total resources transferred by migrant should rise, even as hh
         receives less
Summary statistics
   Variable                                            Mean    Std. Dev.   10th pct.   Median   90th pct.   Num. Obs.

   Treatment 0 (no savings facility offered)            0.23       0.42           0         0          1         956
   Treatment 1 (remittance recipient account only)      0.25       0.43           0         0          1         956
   Treatment 2 (joint account)                          0.26       0.44           0         0          1         956
   Treatment 3 (joint + migrant account)                0.25       0.44           0         0          1         956
   Migrant is female                                    0.29       0.45           0         0          1         956
   Migrant has US bank account                          0.63       0.48           0         1          1         956
   Recipient is migrant's parent                        0.51       0.50           0         1          1         956
   Recipient is migrant's spouse                        0.13       0.33           0         0          1         956
   Recipient is migrant's child                         0.05       0.22           0         0          0         956
   Recipient is migrant's other relative                0.30       0.46           0         0          1         956
   Migrant has been in US 0-5 years                     0.51       0.50           0         1          1         956
   Migrant has been in US 6-10 years                    0.37       0.48           0         0          1         956
   Migrant has been in US 11-15 years                   0.12       0.32           0         0          1         956

   Migrant's years in the US                            5.47       3.51           1         5        10          692
   Migrant has US bank account only                     0.51       0.50           0         1         1          692
   Migrant has El Salvador bank account only            0.09       0.28           0         0         0          692
   Migrant has account in both US and El Salvador       0.09       0.29           0         0         0          692
   Migrant allocation to savings in raffle             19.08      38.95           0         0       100          692
   Migrant's annual income (US$)                      27,110    107,315       4,403    17,945    39,011          666
   Migrant's household's annual income (US$)          39,760    130,216       6,850    25,458    60,192          692
   Migrant's years of education                         8.43       4.94           1         9        12          648
   Migrant's age                                       30.83       7.72          22        29        41          688
   Migrant's annual remittances sent (US$)             4,851      3,951       1,200     3,900     9,600          692
   Migrant's remittances as share of annual hh inc.    0.683      3.836       0.033     0.161     0.688          690
   Migrant's total hh savings balance (US$)            3,531     19,391           0       700     8,000          631
   Migrant's savings as share of annual hh inc.        0.207      1.050       0.000     0.028     0.299          629
   Migrant is US citizen                                0.01       0.08           0         0         0          689
   Migrant hh size in U.S.                              4.89       2.18           2         5         8          692
   Migrant is married or partnered                      0.60       0.49           0         1         1          687
   Migrant is coresident with spouse/partner            0.75       0.44           0         1         1          396
   Recipient allocation to savings in raffle            1.89      13.02           0         0         0          631
   Recipient's annual hh income (US$)                  4,474      7,664         600     2,864     8,751          631
   Recipient has savings account                        0.21       0.41           0         0         1          630
   Recipient total hh savings balance (US$)              301      1,370           0         0       275          630
   Recipient's years of education                       5.05       5.62           0         3        12          621
   Recipient's age                                     47.14      14.98          26        48        67          630
   Recipient's annual remittances received (US$)       2,645      2,834         250     1,800     5,900          631
   Recipient hh size                                    4.59       2.38           2         4         8          631
                                                                                                                        71

				
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