Remittances and Their Microeconomic Impacts: Evidence from Latin America - Migration, Trade, and Development: Proceedings of a conference hosted by the Federal Reserve Bank of Dallas, October 6, 2006

R emittances, defined as the money transfers made by migrants to their families and friends back home, have increasingly captured the attention of policymakers as their magnitude keeps rising and their role in economic development becomes more obvious. Nowhere is this more true than in Latin America and the Caribbean (LAC), a region in which growth in domestic incomes and capital flows has stagnated while private transfers in the form of remittances have reached $53.6 billion (Inter-American Development Bank 2006). The flow of remittances to LAC countries is the highest and fastest growing in the world, exceeding foreign direct investment and net official development assistance to the region. Remittances surpass tourism income and almost always exceed revenues from the largest export in these countries, accounting for at least 10 percent of gross domestic product in six of them. Furthermore, remittances are the least volatile source of foreign exchange in many of these economies, thus playing a crucial role in economic development. In what follows, I provide a general overview of the remitting patterns of migrants to the U. evidence of the impact that remittances have on various spheres of economic development, as is the case with employment, business ownership, education, and health care investments in two LAC economies. These findings underscore the importance of remittances as a resource for the accumulation of human capital investments in education and health and as a determinant of employment patterns in remittance-receiving households in developing economies.