Household Surveys and the New Definitions of Remittances Michael Mann Expert Group Meeting on the Contribution of Household Surveys to Measuring Remittances.

Household Surveys and the New Definitions of Remittances

Michael MannExpert Group Meeting on the Contribution of

Household Surveys to Measuring RemittancesJanuary 14-15, 2008

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BEA’s Remittances Estimates in Context

$9

$27

$33

$0

$5

$10

$15

$20

$25

$30

$35

Personal Transfers US Government Grants Compensation ofEmployees

US International Transactions Accounts in

2006 (billions of US dollars)

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Overview

The new definitions of remittances

U.S. experience in compiling remittances

“Translating” new definitions to surveys

Information needed from household surveys: priorities, and the limitations of survey data

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New Definitions: Background

Technical Sub-group on Movement of Natural Persons (TSG) charged with clarifying definitions and concepts associated with remittances in 2005

The TSG’s recommended definitions have been incorporated into the draft BPM6, which will be published in 2008

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New Definitions

Personal Transfers Personal Remittances Total Remittances Total Remittances and Transfers to NPISHs

- Four definitions benefit policy makers - Clarified definitions facilitate collection

and international comparability

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Personal transfers

DefinitionPersonal transfers consist of all current transfers in cash or in kind made or received by resident households to or from other non-resident households

INCLUDES: Transfers irrespective of the source of senders income

EXCLUDES: Funds deposited abroad for ones own account as a financial investment

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Personal Remittances

Definition (from the perspective of recipient country)(i) personal transfers receivable(ii) plus compensation of employees (COE) receivable(iii) minus taxes and social contributions payable

(related to compensation of employees)(iv) minus transport and travel expenditures payable

by residents employed by nonresidents (v) plus capital transfers receivable from households.

Essentially household-to-household transfers plus earnings net of expenditures of non-resident workers

Personal remittances - supplementary item in BPM6 Personal transfers, and COE - standard items

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Total Remittances

Definition (recipient country)

Total remittances = personal remittances + social benefits

Includes all transfers directly to households from any institutional sector

Supplementary item in BPM6

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Total remittances and transfers to NPISHs

Definition (recipient country)Total remittances and transfers to non-profit

institution serving households = total remittances receivable + current transfers receivable by NPISHs + capital transfers receivable by NPISHs

Supplementary item in BPM6

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US Compilation of Personal Transfers

Model-based approach # of remitters x per-capita transfer

arrayed by: duration of stay in the United States family status country of origin gender

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Outbound Personal Transfers

Four variables Foreign-born population (one year

rule) % of foreign-born population that

remits Income of the foreign-born population % of income remitted

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Outbound Personal Transfers

Population and income from U.S. Census Bureau

% of population that remits and % of income remitted based on surveys/studies

Characteristics of foreign-born population Duration of stay in the United States Family type Country of origin Gender

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US Compilation of Personal Remittances

# of temporary workers x average income

Mostly seasonal Mexican workers

BEA’s measure of net compensation

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Total Remittances

Social Benefits U.S. Government pension payments

estimated using administrative data Private pension payments estimated

using limited partner country data

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Total Remittances & Transfers to NPISHs

BEA does not measure transfers receivable by NPISHs; does measure transfers through U.S.-based NPISHs

Estimated by collecting data on voluntary survey of U.S.-based non-profit organizations

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Assessment of U.S. Methods

Strengths No downward bias from a reporting threshold Covers all means of transfer

Weaknesses Lack regular, representative, quality

information from household surveys on which to base % of pop that remits and % of income remitted

Not sensitive to changes over time or unusual events.

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Special Challenges Faced by the U.S.

Large undocumented foreign-born population

Need updated survey data on the remitting behavior of the foreign-born population

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“Translating” new Definitions to Surveys

Use BPM6 definitions of remittances and concept of residency

Measure personal transfers, personal remittances, and total remittances by the receiving country, and the former two in the sending country

For personal remittances, collect net earnings of nonresidents workers rather than the gross flows because the amount workers expect to bring home may be easier to collect

Surveys can be designed to fill gaps in data sources: e.g. collect data sent thru informal channels to supplement data available on transactions thru formal channels

Useful for asking about motive for remitting

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Household Surveys: Priorities and Limitations

Priorities Identify the remitting population (sending country) or the

recipient population (recipient country) - easier to establish than the amount remitted

Identify the amount remitted per person/household

Limitations Senders may tend to over-report to reflect their generosity Recipient may underreport because of concerns about tax

on income Recall problem – may not be significant for personal

transfers Expect-to-send problem Should exclude funds deposited abroad for own account

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Compilation Guide

Drafted by the Luxembourg Group on Remittances

Discusses various approaches and data sources for compiling remittances

Household surveys will be discussed both as a way of directly measuring remittances and as a way to estimate parameters for models

Guide to be released by the IMF in mid 2008