Diasporas are an important and long-standing feature of the migration experience. Researchers have argued that diasporas can have a significant effect on their countries of origin through their economic and social linkages, particularly during times of civil conflict, war and insecurity. As the flow of remittances from international migration has increased, interest in the economic and social impact of remittances from diasporas has grown.
Several studies rely on the case study approach to illuminate the remittances sent by diasporas. Koser (2003) explores the Eritrean Diaspora and provides a detailed picture of the close involvement of a migrant population in the political and economic life of its country of origin. An interesting issue highlighted in his study is that since independence, adult Eritreans abroad have been asked by their governments to provide a voluntary contribution of their annual income to their homeland.
Empirical studies on diasporas and remittances face significant data challenges because existing data sources do not often provide information about the size of diaspora populations in the host economies. However, some insights can be drawn from studies that study how the size and strength of family and community networks in host and origin communities impact remittance flows. Funkhouser (1995) for example, finds that the greater the number of family migrants, the lower probability of sending a transfer and the contribution from an individual migrant, other things being equal. However, diaspora networks may also affect the migration decision and earnings opportunities in the host environment.
A current question in the literature is how sending countries can engage diaspora populations in order to maximize remittance and impact development in their homelands. For example, the Chinese and Indian diasporas have fueled development in their countries via both cash remittances and their direct engagement associated with the remittances. Many sending countries have sought to develop policies to maximize the amounts of remittances sent back and to stimulate investments by migrants. Remittances may be viewed as a vital source of foreign exchange and a major instrument of national economic development. In the Asian and Pacific context, this has also been referred to as the MIRAB model (Bertram 1986). This is as a national development model, in which a combination of “migration, remittances, aid, and (government) bureaucracy” is expected to contribute to the economic take-off of developing countries.
Over the past decade, many sending states have embarked upon more inclusive diaspora engagement policies through extending special political and economic rights to emigrants and allowing dual citizenship (Gamlen, 2006). Besides fostering ties with migrants and their descendants, improving banking systems and improving competition on remittance markets is seen as a vital strategy to prevent remittances from declining. The Moroccan state, for example, has been rather successful in stimulating remittances through a combination of Diaspora engagement policies, the creation of a network of banks abroad as well as macro-economic, fiscal measures favoring migrants to remit money (de Haas and Plug, 2006). Although such policies to attract remittances may yield some success, past experiences suggest that it is unlikely that increased remittances alone can trigger national economic development, as this requires creating institutional environments that are attractive for migrants to invest in.