Measuring the impact of remittances

As a child, Kimberly Higuera was fascinated by the currency exchange stores that lined the streets of San Ysidro Boulevard near her home in San Diego and by the commitment of people in her community—including her father and her aunt—to remit some of their hard-earned money home to relatives across the border.

But when she began to explore research possibilities for her dissertation as a joint sociology PhD and master’s in public policy candidate at Stanford University, she couldn’t find much information on the social impact of remittances. So, she decided to tackle the topic herself, conducting dozens of qualitative interviews with remitters and recipients and surveying hundreds more in an effort to determine whether people’s social status changes in the United States or Mexico because of their decision to send money to family members.

Higuera’s findings shine light on a financial reality that receives little notice in the United States, even though the flow of money from the United States to Mexico is the world’s “most consistent and abundant remittance corridor,” with about 40 percent of U.S. remittance dollars sent to Mexico, according to data she cites in a policy brief published in Contexts this summer. Higuera argues that this lack of attention to remittance flows means that the United States is likely underestimating the poverty rate of the Mexican immigrant community.

“We’re missing a big part of the picture,” says Higuera, a Stanford King Center on Global Development Graduate Student Research Funding recipient.

For her qualitative interviews, Higuera recruited participants through her own contacts and organizations that serve immigrants, ultimately speaking with 30 remitters, receivers, and their direct relatives in the United States and Mexico. The subjects included people who were undocumented, naturalized citizens, and legal residents. Because of the pandemic, she conducted all but one interview remotely over the phone, Zoom, or WhatsApp.

Some of what Higuera learned about social status and remittances surprised her. For instance, she hypothesized that women’s status might improve based on their role as remitters. Instead, she found that, even though more women work outside the home than in the past, in some cases, they still had little control over their family’s finances. Many of the women in her sample experienced financial abuse at the hands of their male partners, leading them to remit with whatever money they can hold back from the funds allotted to them to run the household.

Higuera found that a person’s social status in their community at home or in Mexico depended more on to whom they remitted, in accordance with a norm known in the literature as “deferred reciprocity” in which parents care for their children and adult children later care for their elderly parents.

“Actors approved of remitters sending money to intergenerational connections like children and elderly people and described it as fulfilling familial duties,” Higuera writes in a draft chapter of her dissertation. “This led actors to respond positively by praising and sanctioning these transactions and yielding status payoffs (i.e. increased regard and sway within the family) for remitters. On the other hand, actors reacted negatively when remitters sent money to younger adults—often intra-generational connections like their siblings and cousins—who did not contribute to the remitter’s deferred reciprocity duties.”

Higuera’s dissertation committee chair, Sociology Professor Tomás R. Jiménez, says Higuera’s work is important because “it shows how economic transactions are inherently social.”

“Those migrants who are sending money home to support their parents experience elevated status in their social networks,” he says. “And that’s because they’re fulfilling the expectations that come from deferred reciprocity. What I love about Kim’s work is that she’s identified the phenomenon in in-depth interviews, but she is also using survey data to test the prevalence of deferred reciprocity in a larger sample.” 

In her online quantitative survey with more than 400 remitters with a Mexican background who had sent money to Mexico from the United States within the past year, Higuera also explored the effects of the COVID-19 pandemic on remittances to Mexico. The flow of money initially dropped precipitously but later rebounded and even surpassed pre-pandemic totals.

“I was really befuddled by that,” Higuera says. “I didn’t expect it.”

Higuera’s survey asked respondents whether they had struggled to send money to family during the pandemic and, if so, how they managed to keep up their commitment. Besides the obvious important variable of household income, the results showed that the most reliable predictor of whether someone struggled to remit during the pandemic was language. Respondents who spoke mostly Spanish were 86 percent more likely to have struggled than English speakers. Higuera says that this result is not surprising since people who have trouble speaking English often have a harder time getting jobs and make less money than people who speak English fluently.

“Learning the language is very important to immigrant mobility,” she says. “Not knowing [English] usually means you have to work in positions that are dominated by recent immigrants, which tend to be lower compensated.”

As for how they continued to remit, Higuera found that most respondents withdrew from savings, cut expenses, saved less money, utilized stimulus payments, or changed jobs.

Higuera says financial support from the King Center helped fund her interviews, transcriptions, and a Mexico-based survey with remittance receivers.

“The King Center helped me bring the project home,” she says.

Higuera’s dissertation, which she plans to defend in June, will include three chapters on her main conclusions regarding deferred reciprocity and gender, as well as the results of her quantitative survey, which included respondents from the United States and Mexico.

The data has potential policy implications. In her article for Contexts, Higuera argues that the U.S. Census Bureau should account for remittances in official measures such as the Supplemental Poverty Measure and that doing so might make some remitters eligible for income threshold programs such as food and nutrition assistance programs, the Earned Income Tax Credit, or Pell Grants.

“Immigrants living in the United States are part of our economy,” she says. “Their children are predominantly U.S. born and are the next generation of citizen voters. Having a little bit more social support on the front end would save us money on bigger problems in the long term.”