Remittances in the Pacific: An Overview

Abstract

In many Pacific island countries, the remittances that flow from internal and international migrants to family members at home are a prominent feature of the national economy. Internal rural-urban migration produces some flows of goods and money, but international migration yields substantially greater ones. There have, however, been few studies of this migration-remittance nexus and even fewer are both detailed and statistically significant. Many are now more than a decade old and may no longer be valid. Information is therefore somewhat limited on the current use of remittances, on their real and potential contribution to domestic incomes and economic development, on their social influence, and on how they function as a safety net against hardship and poverty. Furthermore, many additional questions have not been thoroughly investigated including the extent to which remittances are sensitive to variables like foreign exchange rates, relative rates of interest and inflation, and the extent to which migration and remittances contribute to inequality. Remittances have raised living standards in the islands, they have contributed to employment especially in the service and construction sectors, and they have eased balance of payment problems despite contributing to inflation especially in the larger Polynesian countries. However, it has been argued that remittances have not generally been invested in economic growth, so increased demand for improved consumer goods can usually be met only by further migration. This particular issue is the principal theme of this overview.