Remittances reached 43 per cent of people in the poorest fifth of households in Solomon Islands in 2005, while state social assistance reached 2 per cent, development economist Emilia Tjernstrom wrote in an article published on the Devpolicy Blog.
Tjernstrom, an Associate Professor of Economics at Macquarie Business School, compared who receives remittances and who receives state assistance across five Pacific island countries, using the World Bank's Atlas of Social Protection Indicators of Resilience and Equity (ASPIRE).
The article follows an exchange on the blog in which Naren Prasad argued that reliance on migration and remittances will weaken domestic capacity, and Stephen Howes replied that a Pacific with more migration opportunities is better off than one with fewer. Both drew on national figures such as remittances as a share of GDP, which show how much money arrives but not which households receive it, Tjernstrom wrote.
ASPIRE sorts people into five equally sized groups by household consumption per person before transfers, and reports both coverage, the share of people in each group whose household received a transfer, and benefit incidence, each group's share of the money. Fiji, Solomon Islands, Micronesia, the Marshall Islands and Kiribati report data on both remittances and state assistance, giving six surveys because Fiji appears twice.
Remittances reach unusually far down the distribution in these countries, she wrote. In the median of 93 other countries with remittance data, only 4 per cent of the poorest group receives remittances; the six Pacific surveys all sit between the 85th and 99th percentiles.
The money itself is concentrated at the top. In the five surveys reporting remittance amounts, the poorest group received 4 to 11 per cent of all remittance money and the richest group between 37 and 72 per cent, while the poorest group received 25 to 57 per cent of state assistance.
That pattern is not unusual, Tjernstrom wrote, because migration involves substantial up-front costs and remittance income flows disproportionately to better-off households almost everywhere. Across 91 other countries, the richest group receives a median 47 per cent of remittance money.
Because remittances are much larger overall than state assistance, a small share can still be worth a great deal to poor households. Across the poorest group, remittances were worth 6 to 13 per cent of pre-transfer consumption, counting households receiving none, against 1 to 22 per cent for state assistance.
In Fiji in 2013, people in the poorest group received 8 per cent of remittance money and 25 per cent of state assistance, yet remittances were worth 13 per cent of their consumption and state assistance 4 per cent, she wrote.
Tjernstrom set out several limits to the data. Three of the six surveys predate recent growth in Pacific social assistance, spending among countries that provide benefits has grown from 0.9 per cent to 2.3 per cent of gross national income since 2013, and ASPIRE does not capture money sent to churches or villages or state transfers to communities.
The distributional data are more consistent with Howes's case than national figures are, she wrote, but the gains remain regressive in absolute terms. The policy question that follows is how state assistance should be designed to complement what remittances already do for poor households, rather than whether remittances can replace it.