The “Productive” Use of Remittances

Marvin Mendez / USAID

Among many works on remittances, there is a common reference to the fact that these flows “are primarily spent on consumption, housing and land, and are not utilized for productive investment that would contribute to long-run development.”

This statement points to three assumptions:

  1. Remittances are non-fungible and are kept separately from other sources of income;
  2. Consumption is a problem;
  3. Investing remittances ‘productively’ is a step in the right direction to correcting the problem.

Here we consider and problematize these issues and their policy implications. In most cases, these three assumptions reflect value judgments rather than informed opinions based on empirical testing. These value judgments have to do more with a moralistic opinion against remittance recipients than with data analysis.

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