International Relations 337
The Impact of Remittances on Development:
A Critical Case Study on Mexico

May - June 2009 in Mexico
Dr. Pamela Starr


The flow of capital from migrants living and working in foreign countries to their home country has exploded in recent years.  This dynamic has been particularly pronounced in the northern tier of the Americas where the north-south flow of remittances is the largest in the world.  These flows dwarf foreign aid and often are the country's largest single sources of foreign exchange in an economy.  The size and sudden growth in these capital flows has led researchers and policymakers to ponder how they might be used to promote economic development.  Initially this focused on increasing the flow of dollars by lowering the cost to migrant workers of sending money home but attention quickly turned to the use of these funds.

Research shows that the vast majority of remittances is used for consumption and has helped to reduce immediate poverty among recipient families.  A much smaller sum is used to finance investment and savings, however, making their impact on broader poverty measures much less pronounced.  Given this, the puzzle for policymakers is how to encourage the owners of these private capital flows to employ their money more efficiently to promote investment and thus development.

Students in this course will try to help resolve this complex policy problem in a country that is not only the world's largest recipient of remittances but also our southern neighbor-Mexico.  In Summer 2008, the objective of this course was to develop policy recommendations to enhance the impact of remittances on development in Mexico.  The result was a policy brief that we sent to several of the officials with whom we met.  The mechanism was hard work, albeit coupled with a lot of fun.

After two weeks of intensive study at USC, the class traveled to Mexico City and the state of Zacatecas for two weeks of meetings and interviews. The group interviewed federal government officials, including the Assistant Secretary for Social Development, officials from two state governments and the mayors of three towns that receive a high volume of remittances, administrators of NGOs, development banks, and private banks, and investigators at the University of Zacatecas.  In the process, they saw the sights in two of the most striking cities in the Western Hemisphere, met one of Mexico's most famous living artists, climbed the pyramid of the sun, saw the oldest bull ring in the Americas, ate the best quesadillas, carnitas, and gorditas ever, and danced the night away in a disco housed in an old mine.

The course requires a lot of work, but it is worth it!  As one student put it: "I would never imagined that I would end my USC career with such a course.  It was an unbelievable experience."

For further information on this course, contact Dr. Pamela Starr at pkstarr@usc.edu or an undergraduate advisor at 213.740.2136.