← PLSC 340 · All labs Remittance Lab

Politics of international development · Field lab · Week 11

When the Money Stops

In many poor countries, money sent home by migrants is worth far more than foreign aid. Pick a country, compare the two flows, then hit it with shocks: an aid cut, a recession where its migrants work, and changes to the cost of sending money home. Can remittances fill the hole the USAID cuts left?

Built on Bermeo (2017), International Organization; Tertytchnaya, De Vries, Solaz & Doyle (2018), American Political Science Review; Dinkelman, Kumchulesi & Mariotti (2024), VoxDev; and CGDev, “After Aid Cuts, Here's How to Make the Most Out of Remittances.” Data: World Bank, World Development Indicators (personal remittances received; net official development assistance received; GDP; population).

1 · Pick a countrytop stripe: remittances or aid is bigger

01The country desk

Real World Bank figures in current US dollars. Aid is net official development assistance from all donors, not just the US. 2024 aid figures aren't out yet.

Remittances vs. aid, 2010–2024US dollars / yr
remittances receivedaid received
——

02The shock room

Start from the country's 2023 figures. Move the sliders or use a preset, and watch how much money reaches the country.

Money arriving in —2023 baseline
remittancesaid
—change in money arriving

Where the change comes fromUS dollars / yr
Who feels it
Presets
Presets are illustrations, not forecasts. “Ruble crash” is roughly the 2015 drop in Tajikistan and Kyrgyzstan.
Try changing
Share of the country's total aid that disappears. The US was the largest single donor, but most countries also get aid from others.
Change in what migrants send. Below zero, the host economy is in trouble. Above zero, it's booming.
Fees plus exchange-rate markup. The world average is roughly $6; the UN target is $3. Every dollar saved reaches the family instead.

03What the readings say

The lab handles the money. The readings explain the politics.

Bermeo (2017)

Donors aim at connected countries. In a more connected world, problems in poor countries can spill over to rich ones through migration, disease and conflict. Donors respond by giving more aid to countries tied to them, including the countries their migrants come from.

Tertytchnaya et al. (2018)

Voters blame the government at home. In Eastern Europe, the Caucasus and Central Asia, people whose remittances fell grew less approving of their own incumbent leaders, even though the cause was a recession abroad.

Dinkelman et al. (2024)

Migration can change the home economy. For decades, Malawian men worked in South Africa's mines. The authors find that this migration helped move Malawi's economy away from farming and toward other work.

04Your assignment

Work through these using the controls above and the readings. Quote the numbers you see.

Questions
  1. Which is bigger? Click through all nine countries. In which ones are remittances bigger than aid, and in which is aid bigger? What do the aid-heavy countries have in common?
  2. The ruble crash. Pick Tajikistan or Kyrgyzstan and find 2015 on the chart. What happened to remittances, and why? Using Tertytchnaya et al., who would voters there blame?
  3. Filling the hole. Choose a country and press “Aid halved”. How much would remittances have to rise to replace the lost aid? Try it for Malawi and for Honduras. Why are the answers so different?
  4. Not the same money. Read the “Who feels it” panel. Even if remittances replaced every lost aid dollar, who would still be worse off? Think about clinics, vaccines and families with no one abroad.
  5. Cheaper to send. Press “Fees to $3” for El Salvador. How much extra money reaches families? Then add the 1% US tax. Is cutting fees a good substitute for aid, as CGDev suggests? What can't it do?
  6. Connected donors. Bermeo says donors give more aid to countries their migrants come from. Pick Guatemala or Honduras. Do you expect the US to keep giving aid there after the cuts? Why or why not?
How this lab works

Country figures are the World Bank's. The shocks start from 2023, the latest year with both remittance and aid figures.

The lab treats recorded remittances as what arrives after sending costs of about 6%. It works out how much migrants sent, applies your recession shock, then charges your sending cost. The 1% US tax only applies to cash-funded transfers from the US, so adding a full point overstates it.

Recorded remittances miss money carried home in person or sent through informal channels. That is a big gap for Malawi, whose migrants mostly work in neighbouring South Africa.