View/save PDF version of this document - La Strada International

To promote rural development, must remittances be used for investmentas well as consumption? Much of the research literature on remittances’contributions to development laments that remittances, whether frominternational or internal migration, are used more for consumption thaninvestment. Why that seems to be so is not certain. Kurien suggests thatfamilies tend to view international earnings, because they are earnedoutside the context of the home society and at a relatively higher rate ofpay, as “easy money” and, as a result, they are more likely to spend themon conspicuous consumption and lavish generosity than investment. Thisraises the question of whether remittances from internal migration may betreated similarly, when internal migrants are paid more than they wouldreceive at home and their work takes place in a social context that seemsremoved from village life.A different view, that remittances are likely to be used for productiveinvestment after a family’s basic consumption needs have been met, is tobe found in Huang Ping and Zhan Shaohua’s study of internal migration inChina. The authors emphasize that rural–urban migration is taking place inChina on a massive scale, the implication being that if the large amountsof remittances flowing to rural areas were used for investment they couldmake a significant impact on rural development. In the twenty-five yearsbetween 1978 and 2004, the share of China’s population in cities rosefrom 17.9 percent to 41.8 percent. The number of rural laborers workingoutside their villages for more than three months each year reached at least126 million in 2004. In the future, approximately twelve–thirteen millionadditional rural residents are expected to transfer permanently to urbanareas annually.350The earnings that migrant workers return to their communities already playa significant role in reducing rural poverty. The number of impoverishedrural residents plummeted from 250 million to 30 million between 1978and 2000, though the incomes of 60 million rural residents are justabove official poverty line. One study cited by the authors estimated thatremittances of temporary and permanent migrant laborers totaled US$40billion in 2003 and contributed 18 percent of total rural income, a level ofsupport somewhat greater than that reported by Taylor et al. for Mexicanrural households, but proportionally less than that reported for Indiancommunities in studies cited by Deshingkar.Because most internal remittances are used for consumption rather thaninvestment in productive enterprises, Huang and Zhan are concerned thatthey have not been put to “effective and rational use in promoting ruraldevelopment.” There are no national data on how remittances are used,