Transnational Principal-Agent Information Asymmetry in Remittance Management
Geographic separation between overseas workers and origin-country household members creates information asymmetries regarding remittance usage, leading to misaligned financial goals and sub-optimal household savings.
Picture this
When a parent works in a distant city and sends money home for school fees, they cannot easily verify if the money was spent on tuition or daily entertainment. Providing training or joint management tools to both the sender and receiver aligns their goals like a shared online bank account statement.
What the evidence says
Joint financial education for migrants and home-country recipients raises total savings and remittances while boosting joint decision-making, whereas isolated individual training yields muted impacts on financial decision-making.
- Who
- Review of randomized field evaluations among transnational households across developing country migration corridors (including Indonesia, Qatar, and El Salvador).
- How
- Randomized experimental studies evaluating joint versus individual financial education and financial control mechanisms.
What to do
Require joint participation of both overseas migrants and home-country decision-makers when implementing financial education or remittance-channeling initiatives.
From the source
"Doi, McKenzie, and Zia (2014) examined the impact of pre-departure financial education training in Indonesia, finding that training has positive impacts on financial practices and on savings when migrants and family members are trained together."
Financial Education and Financial Access for Transnational Households: Field Experimental Evidence from the Philippines