# **1 Introduction**

International migration has emerged as one of the most salient features of globalization in the twentyfirst century. The World Bank estimated 215 million migrants worldwide in 2010. This represents 3 percent of the world population and almost a three-fold increase from an estimated 76 million migrants in 1975<sup>1</sup> . In addition to the sheer size of this increase, it is also noteworthy that 79 percent of the existing stock of migrants originates from developing countries. This rapid growth in international migration and the relatively large representation of developing countries in the stock of emigrants can primarily be attributed to two related phenomenon. The widening income gap between the developed and developing countries has made residents of poorer countries much more willing to cross international borders in search of economic opportunity. On the other hand, advances in transport and communication technology have not only facilitated a better flow of information across borders, but also lowered the costs of migration significantly, making newer destinations economically viable<sup>2</sup> .

This increase in the number of work related migrants has naturally led to a concurrent increase in private transfers made to their families back home in the form of remittances. Estimates from the World Bank indicate that the global flow of remittances to developing countries rose from $55 billion in 1995 to $307 billion in 2009 implying an annual growth rate of approximately 13 percent. This amount is 2.5 times the Official Development Assistance (ODA) and accounts for roughly 35 percent of the total financial flows to the developing world. For many countries hitherto poorly integrated – with the global economy be it through inadequate trade and movement of financial capital or – direct foreign investments the opportunity to “export” labor and benefit from earnings repatriated home represents a significant opening up. At the macroeconomic level, this presents an enormous opportunity for growth as large remittance flows can make countries resilient to shocks and bolster a country’s creditworthiness and ability to access funds from international capital markets.

Understandably, the scale and the pace of the flow of people and the magnitude of the remittances they send back has heightened interest among policymakers and researchers to understand the socioeconomic circumstances _within_ the household and their communities that shape and are in turn shaped by migration and remittances<sup>3</sup> . Recent empirical work in this area has advanced mainly along four strands: the role of migration networks in channeling or inhibiting migration flows (Munshi (2003),Munshi and Rosenzweig (2009), McKenzie and Rapoport (2007)); methodological issues in estimating returns to migration (McKenzie, Gibson, and Stillman (2010)); determining labor supply response to migration and remittances (Amuedo-Dorantes and Pozo (2006), Lokshin and Glinskaya

> 1Migration and Remittances Factbook (2011), World Bank

> 2See Chiswick and Hatton (2003) for a detailed treatment of the historical evolution and underlying drivers of international migration

> 3Economic research on migration itself is not new. But historically it has either tended to focus on the performance of migrants in labor markets in the host country, often vis-à-vis the natives or remain circumscribed within concerns about “brain drain” and attendant consequences for growth. (See (Borjas, 1994) for a review.)

2