Remittances

Remittances in China aren’t all they are cracked up to be

 

There are huge amount’s of people moving around in China, and moving around for work; up to 274 million people. Like most migrants, they tend to go to earn higher wages, and this add’s up to a lot of money, with estimates of to 300 billion yuan being sent back by economic migrants to their families. A presumption that can and is made is these higher wages are beneficial for the children left behind because they are being sent back, and then have more money spent on their education. This however, might not be the case..

“When it comes to budget components, we find that remittance-recipient households allocate a smaller share of their budget to education than non-recipients do, and we thus add evidence to the possible negative effect of migration on education outcomes of children who stay behind.”

The households with migrants leaving spent on average 325 yuan per child, whereas households where the parents stayed spent nearly 500 yuan per child. Although households which are receiving remittences are spending more, this is going on consumption and not being invested in human capital. Now while we may well enjoy the increased consumption, we would probably enjoy the benefits of more education and therefore more wealth in the future a great deal more.

“The ones left behind are less likely to value education, and therefore less likely to spend on this particular expenditure component. This could be the case when migrants are parents who leave their children behind, under the care of (less educated) grand-parents.”

It is also strange that result isn’t repeated in other countries which have large recipient communities, such as Ghana, Guatemala, Ecuador, Colombia, Mexico, the Philippines, Nigeria and Eritrea. This may well be that the benefits of education are touted more often in these countries, it might be because of the effect that motivated and skilled parents can have on their children (influencing them to do better but having lower wages themselves as a result) or might be because the returns to higher levels of education are not so easily recognised by the carers for the children. This is an important point to think about as we usually tout the benefits of remittences, and see them as generally quite effective in promoting growth.

 

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