This paper written for the UN Research Institute for Social Development reviews empirical studies on the effects of remittances in developing countries. The conclusion is that they have the potential to spark overall development, but that social policies and economic reforms are required to allow this potential to be realized. It sounds like common sense when you say it like that, but a lot of good points sound obvious after somebody says them.
The paper explains that because remittances only directly benefit those with family members who are willing and able to migrate it is difficult for them to have broad societal impact. In order for the money to affect development, new policies are necessary, but those targeted at remittances are necessarily limited in scope. You can make it cheaper and easier to remit money, for example, but this only increases the quantity of remittances to that same limited group of people. Plans to collectivize remittances are, in the words of the paper's author “rather naive”.
Therefore the only policies choices left are “general development policies aimed at restoring political trust, creating a stable investment climate and offering social protection to people.” In other words, remittances can create synergy with traditional development projects, but they can't replace private philanthropy, ODA, and local government/community action.
The paper isn't terribly long, but it also isn't written in a style intended for a broad audience. (Example sentence: “The significant empirical and theoretical advances that have been made over the past several decades highlight the fundamentally heterogeneous nature of migration-remittance-development interactions, as well as their contingency on spatial and temporal scales of analysis, which should forestall any blanket assertions on this issue.”) If you’re willing to slog through this kind of prose, I recommend giving it a look.
