Remittances, Migrants’Education and Immigration Policy: Theory and Evidence from Bilateral Data

We investigate the relationship between remittances and migrants' education both theoretically and empirically, using original bilateral remittance data. At a theoretical level we lay out a simple model of remittances interacting migrants' human capital with two dimensions of immigration policy: restrictiveness, and selectivity. The model predicts that the relationship between remittances and migrants' education will be inversed-U shaped, with the increasing segment being longer (resp. shorter) for more restrictive (resp. selective) immigration policies. These predictions are then tested empirically using bilateral remittance and migration data and proxy measures for the restrictiveness and selectivity of immigration policies at destination. The results strongly support the theoretical analysis, suggesting that immigration policies determine the sign and magnitude of the relationship between remittances and migrants' education.