Impact of Bank Accounts on Migrant Savings and Remittances: Evidence from a Field Experiment Aimee Chin, University of Houston, NBER & IZA Léonie Karkoviata, University of Houston-Downtown Nathaniel Wilcox, Chapman University April 2011

Research Questions What is the impact of being banked? How does the impact vary by individual’s degree of control over household resource allocation?

Motivation 1 in 10 US household do not have a transactions account The poor, minorities and immigrants more likely to be unbanked Better understand the causal impact of extending bank access to the unbanked Many studies estimating correlations between being banked and savings (e.g., Amuedo-Dorantes and Bansak 2006) Little evidence with causal interpretation US context: Individual Development Accounts experiment in Tulsa, Oklahoma (Mills, Gale, Patterson and Apostolov 2006, Sherraden 2009) Developing country context: Dupas and Robinson (2009) randomized experiment; Aportela (1999) and Burgess and Pande (2005) natural experiments This study provides first experimental evidence on effects of bank accounts in US context 3

Motivation Better understand remittance behavior 3% of world’s population lives outside their country of birth, and many remit earnings Remittance flows to developing countries totaled $338 billion in 2008 Mexico: $26 billion remittances, which is 2% of GDP and greater than FDI flows! Not much is known about how migrants decide how much to remit This study examines the role of a having a US bank account on migrants’ remittances 4

Background Mexican immigrants 31% of US foreign-born population and 4% of the total US population 1 in 11 Mexico-born lives in US Over half of Mexican migrants in US are undocumented Undocumented migrants less likely to have bank accounts (Amuedo-Dorantes and Bansak 2006—19% of migrants whose last trip to US was in 2000s had US bank account, 20% legal, 7% undocumented) Some argue that difficulty of meeting documentation requirements responsible for high unbanked rate 5

Background 2001 Patriot Act made it easier for Mexican migrants to open US bank accounts Banks must have customer identification program US Treasury endorses acceptance of ID issued by foreign governments, including the matrícula card Matrícula consular card Issued by the Mexican Consulate Began in 1871 as a way for Consulate to keep track of Mexican nationals outside of Mexico for tax and consular reasons Demand increased after Patriot Act 6

Background How to obtain a matrícula card Apply in person Provide proof of: Mexican nationality Identity Domicile in place under Consulate’s jurisdiction $27 application fee 7

Background Uses of a matrícula card Some banks, local police departments and local governments accept matricula cards as valid IDs Appears to do little else Does not establish legal status Does not help get driver’s license in state of our study Does not provide access to government welfare and health benefits Not required for use of local services in city of our study Exploit institutional feature that matrícula card is used by undocumented migrants to open bank accounts (but apparently useful for little else) to design an experiment that provides exogenous variation in having a US bank account 8

Experimental Design and Implementation: Overview Randomized field experiment providing Mexican migrants with assistance in obtaining a matrícula card Both control and treatment group received: Same information regarding matrícula application process and US bank account Same stamped letter that constitutes proof of domicile Treatment group offered: Help with documents: document screening, help securing documents Appointment with Consulate, transportation to Consulate, help filling out application $27 application fee Reminders to open a US bank account

Experimental Design and Implementation: Study Participants Live or work in Boomtown, a small US city with population between 50,000-100,000 population Recruited primarily from Boomtown’s day labor center Requirements: Mexican national age 18 or older No valid matricula card No US bank account Has remitted within the past 12 months 215 male migrants completed baseline survey in Feb/Mar 2007 184 (85%) of them also completed the follow-up survey in July/Aug 2007 10

Comparison of Control and Treatment Groups at Baseline 11

Study Outcomes Obtained a matrícula card Opened a US bank account Income over 5 months between baseline and follow-up surveys Remittance rate = Total remittance flow/US Income US savings rate = Flow of savings in US/US Income Mexico savings rate = Flow of savings in Mexico/US Income Total savings rate = (US + Mexico savings flows) /US Income

Comparison of Control and Treatment Groups’ Income, Remittances and Savings at Baseline 13

Estimation Framework (Eq 1) yi = α + βTi + Xi + i yi : outcome measured at the follow-up survey Ti : dummy for being randomized into treatment group Xi : vector of control variables β : intention-to-treat effect

Effect of Treatment on Obtaining a Matrícula Card 15

Effect of Treatment on Obtaining a US Bank Account 16

Effect of Treatment on Income, Remittances and Savings 17

Effect of Treatment on Income, Remittances and Savings 18

Summary of Treatment Effects ITT Obtained a matrícula card 81% Opened a US bank account 38% Income $226 (insignificant) Remittances -6.0% ≈ -$250 Total Savings Flows 8.7% ≈ $364 US Savings Flows 8.2% ≈ $338 Mexico Savings Flows 0.6% (insignificant) ≈ $26 Evaluated at control group’s mean income of $4158 Baseline stock of savings is $484

Heterogeneity in Treatment Effects (Eq 2) yi = α + βCTi + βNCTi *NoControli +δNoControli+ Xi + i NoControli = 1 for no control, 0 for sole or shared control βC = treatment effect among people who report control βNC = additional treatment effect among people who report no control

Effect of Treatment on Obtaining a Matrícula Card and Bank Account 21

Effect of Treatment on Income, Remittances and Savings 22

Summary of Treatment Effects by Reported Control ITT, No Control ITT, Shared or Sole Control p-value, effects equal? Obtained a matrícula card 80% 82% 0.709 Opened a US bank account 62% 21% <0.001 Income $575 -$42 (insig) 0.037 Remittances -9.4% ≈ -$391 -3.5% (insig) ≈ -$145 0.185 Total Savings Flows 12.0% ≈ $499 6.3% ≈ $262 0.128 US Savings Flows 15.2% ≈ $632 2.8% (insig) ≈ $117 0.001 Mexico Savings Flows -3.2% ≈ -$133 3.5% ≈ $145