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America have a higher rate of having bank accounts than non-remittancerecipienthouseholds. One explanation for this trend may be that whenhouseholds accumulate savings, they seek more efficient ways to mobilizethese and resort to financial institutions. Another possible explanation isthe influence of families in the United States who are now more familiarwith financial institutions. Other studies have also shown that remittancerecipienthouseholds save more than those who do not receive remittances(Andrade-Eeckoff 2003). This observation underscores the importance ofappropriate policies to promote banking so that savings rates would likelyincrease and opportunities for lending could be made available in localcommunities.4.5 Multiplying Effect of RemittancesRemittances also have a multiplying effect on the economy. In practice, thismeans that the increased flow of money into the economy from remittancescontributes more than its actual or original value when remittances arespent (usually), saved, or invested (less often), more money is availablethroughout the economy, leading to an overall expansion in economic health.In other words, the multiplier effect creates a positive and disproportionateenhancement in spending and financial flows.In order to measure the particular effects of remittance flows onemployment and economic productivity, economists explore the portion ofexpenditures of remittances spent on household consumption. In GermanZarate’s study of remittances and the Mexican economy, he concludesthat remittances seem to flow to mostly small rural municipalities that arelinked to more dynamic economies through the goods and labor markets,where the main beneficiaries are urban and rural businesses. Therefore inthe macroeconomic perspective, rural areas that receive remittance flowstend to have ripple effects on the urban economic centers as consumptionincreases and demand is boosted for goods and services produced inurban areas. 3 An earlier study by Massey and Durrand arrived at similarconclusions, stressing that the multiplier effect could be as high as $4. Thatis, every “migradollar” that enters a local economy generates $4 in demandof goods and services (Durrand and Massey 1996).3193German Zarate “The Multiplier Effect of Remittances” 2004.