Microeconomic and Macroeconomic Contexts of Remittances

Microeconomic and Macroeconomic Contexts of Remittances

Andrej Přívara (University of Economics in Bratislava, Slovakia)
DOI: 10.4018/978-1-7998-0111-5.ch008
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Global remittances flow has been rising considerably over the last decade. Their share in the GDP in some (especially developing) countries reaches several percent. That is why their impact on a migrant's country of origin has become a subject of debate in the scientific community. This chapter provides a synthesis of views that have crystallized as part of an ongoing academic debate on remittance determinants and their impact on recipient countries. The author aims to analyze the fundamental scientific opinions published on this topic and to outline possible directions for future research on migrant remittances. The chapter analyzes individual determinants as well as remittance effects on two levels: microeconomic and macroeconomic ones. The analysis concludes that remittances are an important source of external financing for the economies of developing countries. Nonetheless, they cannot be considered as a panacea for economic backwardness.
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Data Sources And Their Interpretation

The recurring problem of remittance scrutiny lies in the collection of the statistical data related to their flows. The problem is caused primarily by different interpretations of the term by different institutions following their development. Investigation in our article will be based on secondary data gathered from the World Bank databases. The World Bank calculates remittances in accordance with the methodology designed by the International Monetary Fund, which suggests that this notion consists of three constituents:

  • Workers’ remittances, i.e., money and merchandise transfers, which are sent by migrants living abroad for more than one year to the country of their origin;

  • Compensation of employees, i.e., gross wages of employees living abroad for a period less than 12 months;

  • Migrants’ transfers, i.e., money and merchandise transfers related to cross border migration (e.g. day-to-day commuting abroad).

Figure 1.

Top Remittances–Receiving Countries, as of 2015, in bln USD

(World Bank, 2016)
Figure 2.

Top Remittance–Receiving Countries, data as of 2014, in % of GDP

(World Bank, 2016)

Key Terms in this Chapter

Remittances: Household income being generated by economic activity in another than the home economy, which subsequently is transferred to or earned on the account of the household in the home economy. As a consequence, remittances can be either based upon long-term residence in another country (usually combined with economic activity as migrant worker), or upon short-term work engagements as seasonal worker or upon permanent work as border worker without being resident of the host economy.

The Workforce or Labour Force: The labour pool in employment. It is generally used to describe those working for a single company or industry, but can also apply to a geographic region like a city, state, or country.

Balance of Migration (Migration Increment of Population): Calculated as a difference between a number of people arrived in the territory of Russian Federation territorial subject and a number of people left it.

Immigration: The international movement of people into a destination country of which they are not natives or where they do not possess citizenship in order to settle or reside there, especially as permanent residents or naturalized citizens, or to take up employment as a migrant worker or temporarily as a foreign worker.

Household: Includes either one person living alone or a group of people, not necessarily related, living at the same address with common housekeeping, i.e. sharing at least one meal per day or sharing a living or sitting room.

Migrant Transfer: Capital transfers related to all the financial and non-financial assets that migrants bring with them when they move to the host country, or when they finally return to their home country. Under BPM6 these are no longer regarded as balance of payments transactions. Their values have always been insignificant in the EU Member States and are therefore disregarded in this paper.

The International Monetary Fund (IMF): An international organization headquartered in Washington, D.C., consisting of 189 countries working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.

The Visegrád Group, Visegrád Four (V4): A cultural and political alliance of four Central European states – the Czech Republic, Hungary, Poland and Slovakia, that are members of the European Union (EU) and NATO – for the purposes of advancing military, cultural, economic and energy cooperation with one another along with furthering their integration in the EU.

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