1. The effect of migration on children’s outcomes: Evidence from Mexico and the Pacific Islands David McKenzie World Bank

2. Traditional approaches to finding the impact of remittances 1)Ask migrants what remittances are for, or families what remittances are spent on. E.g. Mexican Migration Project

3. result Early studies came to largely pessimistic conclusions about potential of remittances to promote economic growth => View remittances as leading to a “cycle of dependency”, money as being wasted on food, drinks, fiestas and conspicuous consumption.

4. Newer studies Realize money is fungible, so even if spend remittances on parties, this allows you to spend some of your other income on other uses, including productive investments. Use regression approach, e.g. Outcome = a + b*Remittances + c’X + e

5. How do we know what the impact of remittances really is? Approach 1: Treat remittances as manna from heaven… - assume some households just happen to receive remittances, see what they spend the additional income on - Problem: suppose I only send remittances to my family when my child is sick – then I would see households which receive remittances have worse child health!

6. Are remittances any different from other income? One reason remittances might be spent differently is that they are only sent for specific events, or conditional on certain actions occurring: –66% of remittances received in Tonga were for a special purpose. –Main purposes are: misinale (33%), payment of school fees (28%), funeral expenses (14%) –Money is fungible, so earmarking only changes consumption if conditions are binding, or if families receiving remittances face different prices.

7. Why else might remittances be spent differently? Households may view remittances as being more temporary in nature  Permanent income theory suggests households will save a larger fraction of temporary income. But cross-sectional surveys provide very little information on sustainability. => PINZMS asks migrants and their families expectations for remittances.

8. The expected chance of remittances decays Expectation of receiving remittances declines over time, and declines for almost every single family:

9. Implications The chance of receiving remittances is expected to decay over time for both migrants and their families  Should expect to see receiving households save or invest more of it than they would for wage income.  One form of investment is in child health and education

10. Approach Two: Look at the overall effect of migration Remittances aren’t just manna from heaven, they are accompanied by other events – many of which are tied to the migration decision. Need to think of reasons why one household may have a migrant and another similar household would not (instrument).

11. Example 1: Impact on Schooling Remittance effect: –Alleviates credit constraints – buy more schooling if you are constrained –Income is a normal good – buy more of everything including schooling But what else is going on? Absent parents – may require kids to do things for parents Incentives to migrate – seeing parents do well abroad with low schooling lowers incentives to get education.

12. How important are these other effects? Survey of Zacatecas students – found those with migrant parents less likely to want to continue their studies. McKenzie and Rapoport: –Find migration REDUCES educational attainment –Living in a migrant household lowers the probability of boys completing junior high school, and of both girls and boys completing high school –Schooling appears to be substituted by migration for boys, and increased housework for girls. This is the opposite from what we would predict just looking at remittances!

13. Our identification strategy Use historic state-level migration rates as instruments for current migration Rates are for 1924, and reflect pattern of arrival of the railroad into Mexico Initial networks lower cost of subsequent migration, resulting in self-reinforcing process –A household living in a community with high levels of early 20 th century migration therefore more likely to have a migrant member than an otherwise identical household in a community with low historic migration

14. Example 2: Impact on child health outcomes Hildebrandt and McKenzie (2006): Remittance effect: more income means households spend more on health inputs, improving health outcomes. Additional migration effect: mothers in migrant households have better health knowledge, allowing them to get better health outcomes out of the same inputs. Source of exogeneity: historic networks.

15. Results Find 3 to 4.5% lower infant mortality rate in migrant households Being in a migrant household raises birthweight by 364 grams, and lowers probability of being underweight by 6.9% Only part of this effect is due to greater wealth/income, some is due to improvements in health knowledge But: some costs – less likely to be breastfed, receive all vaccines on schedule in first year.

16. Example 3: Effect of Migration on mental health Stillman, McKenzie and Gibson (2006). Have a great way of identifying the effect of migration: New Zealand has a quota to allow a certain number of Tongans in each year, uses a lottery to decide who can come in We surveyed winners and losers in the lottery.

19. Findings Improvement in mental health with migration Improvement is mainly for women and for people with poor mental health prior to migration Only part of the improvement is linked to higher incomes… –Gains occur for those who want to migrate for a better social life, to escape cultural restrictions, and to get access to better public services in New Zealand.

20. Tongan migration and child health Child migrants: (effects of first year of migration) –Find less stunting for 0-2 year olds –But more obesity for 3-5 year olds –Families are eating more milk, meat and fats Children in remaining household –No significant impacts of household member migrating on schooling or health.

21. Conclusions It is really hard to separate the effect of remittances from the overall effect of migration Migration has a number of socioeconomic effects which differ from the pure effect of remittances

22. Policy lessons Mexican case: –Migration can induce less schooling in Mexico – want to open up more migration channels which require schooling/allow return to schooling in the U.S. –Some costs to children in Mexico in terms of health inputs – less vaccinations, etc. Careful attention to this needed in migrant-sending communities Tongan case: –Obesity a big issue for this population – if migration is increasing this for older children, need more work to design interventions to reduce this.