system
Given the following post, respond as if you're commenting on Reddit:
human
Are remittances harmful for the host country's economy?

A common argument against immigration that I heard is that non-native workers deplete the country of economic resources when they send back part of their paychecks to their family in the country of origin, as they are not re-investing their money in the national economy. How true is that?
gpt
I find that cases like this become much more comprehensible once you remove the idea of money from the equation.

Pretend the remittances were sent back "in kind."  Non-native workers buy bags of nonperishable food, or durable goods, or appliances like automobiles to ship back to their extended family.  In this case, their work-effort is obviously being "re-invested in the national economy," since that's the source of the goods being sent abroad.

Now, reintroduce money.   A non-native worker sends a bunch of (e.g.) UK Pounds abroad.  Just what is their extended family supposed to do with pictures of the Queen?  As popular as she might be worldwide, foreign merchants aren't going to accept her image just because; pound-notes aren't legal tender outside the United Kingdom.

So what does this family do?  They convert the sent currency back to local currency in order to buy local goods and services (or the remitter does the conversion first, same net effect).  Now somebody else &ndash; who wants them &ndash; holds those UK Pounds, and presumably they want those notes to purchase goods/services/investments in the UK.

At an aggregate level, remittances act to reduce the value of the host's currency, and all other things being equal this stimulates aggregate demand via the export channel.