I am pleased to have been asked to discuss a paper in an ASHE (American Society of Hispanic Economists) session at the 2022 AEA meeting. Our session is “Hispanics and Finance” on Sunday January 9 at 12:15pm Eastern Time.
The paper is “Neuroeconomics for Development: Eye-Tracking to Understand Migrant Remittances”. Here is a bit about each author. Meeting in person is a benefit that I miss this time, since the meeting is virtual.
Eduardo Nakasone of Michigan State University has several papers on information and communication technologies and agricultural markets. I pondered this sentence from one of his abstracts, “Under certain situations, ICTs can improve rural households’ agricultural production, farm profitability, job opportunities, adoption of healthier practices, and risk management. All these effects have the potential to increase wellbeing and food security in rural areas of developing countries. Several challenges to effectively scaling up the use of ICTs for development remain, however.” His prior work on ICTs is relevant to the paper at hand, which is about how migrants utilize information about remittance tools.
Máximo Torero is the Chief Economist of the Food and Agriculture Organization (FAO). He has worked on development and poverty in many capacities including at the World Bank.
Angelino Viceisza, an associate professor at Spelman College, is doing interesting work at the intersection of Development and Experimental Economics. Here is his 2022 paper (Happy New Year!) published in the Journal of Development Economics.
I am discussing their paper on how migrants choose financial services. The pre-analysis plan is public. Remittance sending is important for migrants and for the entire world economy. The authors remind us that a significant chunk of what migrants earn is “lost” to service fees. The authors are examining how migrants incorporate new information about competitive alternative services.
Some neat aspects of their work:
- Their subject pool is migrants who send remittances, recruited in the DC area.
- Like most experiments I am used to, the stakes are real and significant.
- Not only can they observe which service is selected, but by using eye-tracking they can get a sense of what information was salient or persuasive.
It is potentially a big deal for migrants to compare services more rigorously and switch providers more readily. The internet, as least in theory, makes it easy to find information on transaction fees. Policy makers have even proposed subsidizing websites that compare the fees of money transfer operators (MTOs). The authors are trying to understand how such a website might impact behavior. A basic question is: does information in this format affect behavior? A small change in behavior could have a huge impact on the world economy and recipient countries. Imagine if a country currently receiving a billion dollars in remittances had 1% more next year because migrants switched to a more efficient service. Might it be cheaper to nudge people toward low-fee services than to send foreign aid?
Their experiment will reveal whether people make switches based on new information, and it also helps us start to understand which attributes of MTOs migrants consider. Their design includes a treatment manipulation that sometimes emphasizes either transfer speed or user reviews.
If you have read this far hoping for a summary of their results, I will disappoint. Their paper is not public yet and data is still being analyzed. I can say that migrant subjects do sometimes switch their choice of MTO, based on information, in some circumstances. They are more likely to make a switch when the induced stakes are higher. If you tune into the session tomorrow, you will get to hear a summary of preliminary results by the author (not free to public, requires conference registration).
Bitcoin, I believe, compares favorably to other MTOs. Reportedly, easing payments of remittances is a reason El Salvador formally endorsed Bitcoin as a currency.