Jean Nahrae Lee, Millennium Challenge Corporation
Leora Klapper, World Bank
Michael Clemens, Center for Global Development
Rapid urbanization is reshaping developing countries and intensifying spatial inequalities. In their paper, Jean Lee and coauthors experimentally introduced mobile banking to rural and urban populations in Bangladesh to investigate inequality-reducing transfers.
The sample includes very poor rural households whose family members had migrated to the city and previously used inefficient traditional transfer mechanisms. One year later, urban-to-rural remittances increased by 30% relative to a control group. For active mobile money users, rural consumption increased by 7.5% and extreme poverty fell. Rural households borrowed less, saved more, and consumed more in the lean season. However, urban migrants bore costs, reporting substantially worse physical and emotional health.