Remittances: An Economist's Remedy for Organized Crime in Mexico Ana Swanson - Forbes
go to original October 3, 2014

Violent drug crime and inadequate enforcement have proven to be unshakeable problems in Mexico. While the country’s murder rate declined last year, it remains among the highest in the world. National borders have been unable to contain the negative effects: Mexico’s drug war has spurred waves of illegal immigrants, drug addiction, and homicides throughout the US.

Can anything be done to improve this situation? A recent paper published by the Inter-American Development Bank offers one interesting solution. The study found a linkage between the percent of Mexican households receiving remittances — money sent back home from workers abroad — and a lower homicide rate. In the study, every 1 percent increase in the number of households receiving remittances reduced the homicide rate by 0.05 percent. While the direct causes are unclear – perhaps higher incomes deter people from committing crimes, or lead to more education and job opportunities – the findings are nonetheless powerful.

Remittances play a vital role in the Mexican economy. Mexican emigrants are among the largest senders of remittances worldwide; in 2010, Mexicans working the U.S. sent back more than $22 billion in remittances, accounting for 2.1% of Mexican GDP, according to the paper. Remittances provide more funds to Mexico than either receipts from international tourism or foreign direct investment flows. In Mexico’s poorest areas, they can make up 19.5% of local income.

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