Impact of Transnational Remittances on Income Distribution and Development in Developing Countries: A Human Rights Perspective

Remittances are close to triple the value of the official development assistance (ODA) provided to low-income countries and comprise the second largest source of external funding for developing countries after foreign direct investment (FDI). Remittances have proven to be the least unstable source of financial flows for countries affected by external shocks. In this paper I review the current literature on the impact of international remittances on income distribution and quality of governance in migrant-sending countries at micro (Household) and macro (state) levels, with the latter being measured in terms of governments’ respect for physical integrity rights. I also assess the policy measures to support remittances in order to increase transfer flows and their productive use for development. As this paper does not ignore the positive impact of remittances on families well-being, community and national levels through easing budget constraints, human and physical capital formation, investment and saving channels, and socio-economic stability; we observe a negative effect of remittances on income distribution within developing countries in the short run and a negative impact on the quality of governance. Therefore the policy options suggested target government policies that can enhance the distributional effects of remittances. The policy literature calls for strengthening of the infrastructure supporting remittances by reducing transaction costs; formalization of remittance flows; and measures to increase the productive use of remittances through government policies and individual and private sector initiatives. And if these policies are well integrated into broader national development strategies, remittances can benefit poor families, communities and developing countries