Question

Explain how remittances from migrant workers create purchasing power in other countries. Why do migrant workers send remittances? What happens with this money?
in paragraph

Answer 1

When migrant workers send money home, those remittances immediately raise the disposable income of recipient households and thus their purchasing power: families can buy more food, clothing, medicine, school fees and other goods and services, which raises local demand and can stimulate small businesses and jobs through multiplier effects; at the macro level remittances are a steady inflow of foreign currency that improves a country’s balance of payments and can stabilize consumption during downturns. Migrants remit for many reasons—routine family support and obligations, to pay for education or health care, to repay loans, to save or invest for a planned return, to insure relatives against shocks, and sometimes to maintain social status or meet cultural expectations—so remittances serve both altruistic and strategic roles. What recipients do with the money varies: much is spent on basic consumption, but substantial shares are used for housing, schooling, healthcare, debt repayment, bank deposits, small-business investment or land and livestock purchases; some is saved or sent on to other relatives. While remittances reduce poverty and increase access to credit and services, they can also contribute to higher local prices, exchange-rate appreciation, dependency on external income, and sometimes inefficient spending if not channeled into productive uses.