Migrant Remittances and Information Flows: Evidence from a Randomized Field Experiment
Researcher: Cátia Batista
How do information flows matter for remittance behavior? Nova SBE’s Professor Catia Batista and co-author Gaia Narciso examine this research question using evidence from a randomized field experiment conducted on a representative sample of immigrants in the greater Dublin area, in Ireland.
Does “keeping in touch” affect migrant remittance behavior?
Why do migrants remit money to their family and friends abroad? How is the value of remittances determined? And do information flows matter for remittance behavior? The aim of this study is to enhance the understanding of the role of migration networks and the interaction with information flows in determining remittance behavior.
The researchers use a randomized control trial to evaluate the impact of information flows between immigrants and their friends and families abroad on remittance flows. The hypothesis tested is that information flows may increase the value and frequency of remittances via three different mechanisms:
- First, communication flows may contribute to an increase in the quantity and quality of the information within transnational households, therefore improving migrant control over remittance use.
- Second, the increased communication flows may also lower the remittance costs and enhance trust in remittance channels due to experience sharing.
- Third, the increased communication flows may stimulate the demand for remittances on the remittance recipients’ side.
This research contributes to three strands of literature. First, it provides novel evidence on the role of improved information flows as causal determinants of remittances. It also relates to the literature analyzing the relevance of asymmetric information within households: past research had shown that spatial distance and lack of monitoring could affect remittance flows; this work shows that improving information flows and their quality may indeed increase the magnitude of remittances. Finally, recent research has focused on transaction costs and trust in remittance channels as determinants of remittance flows. This research complements that work by highlighting the important role that improved information flows may have as determinants of migrant remittances.
Using experiments to measure how much of a difference it makes to “keep in touch”
In order to quantitatively assess the impact of communication flows on the extent and value of remittance flows between migrants and their networks abroad, the researchers implement a randomized field experiment in which a randomly chosen fraction of the immigrants in the sample are offered the possibility of contacting their networks outside the host country for free from their mobile phones over a varying number of months. The remittance behavior and other characteristics of individuals in the treatment groups are contrasted with those of individuals in the control group (who were not affected by the experimental intervention), in order to assess causal effects of the experiment.
To measure the effects of this experimental intervention, a household survey representative of the immigrant population in the Greater Dublin area was conducted. The resulting dataset includes detailed information on migrant networks before and after migration (both in the host country and abroad) as well as on the intensity, content and quality of information flows between these immigrants and their networks.
The researchers make use of actual phone company data migrants’ contacts, in addition to contacts reported in the survey, in order to confirm the existence of a significant impact of the experiment on the creation of new information flows (both in terms of number of contacts and duration of communication flows).
“Keeping in touch” substantially increases the money value migrants send back home
Batista and Narciso provide experimental evidence that increased information flows have a positive impact on different dimensions of remittance behavior. In particular, they find a small increase in the number of people who receive remittances from the migrants in the sample (extensive margin), but a significant, larger than proportional increase in the value of remittances sent (intensive margin). These results survive a number of robustness checks, namely controlling for substitution of calling costs by remittance flows.
Different heterogeneous effects are examined that may help understanding the mechanisms underlying these results, namely the nature of relationships between migrants and remittance recipients, and the content and quality of information flows between migrants and their contact networks abroad.
These findings highlight the importance of investing in technology that increases the reach and efficiency of communication flows. In addition to other beneficial effects, such an investment may be valuable to developing countries with substantial emigration stocks as there may be increased remittances flowing back to the countries of origin of migration.
This article is based on the forthcoming paper by Catia Batista (Nova SBE) and Gaia Narciso, “Migrant Remittances and Information Flows: Evidence from a Randomized Field Experiment”, NORFACE Migration Discussion Paper Series.