Migrant remittances and inequality in Central‐Eastern Europe

Abstract

The impact of remittance flows on growth and income distribution has attracted a great deal of attention, but the theoretical and empirical literature on the relationship between remittances and economic development is far from clear. Although there is wide consensus that foreign remittances can help the receiving households to increase income, consumption and capabilities to cope with socioeconomic shocks, there has been little quantitative research on impacts of remittances on household welfare and poverty. Our paper seeks to fill some of these gaps proposing an empirical analysis of the role of remittances as a tool for reducing inequality and covering households against poverty and social exclusion risks. The empirical analysis focuses on four Eastern European Countries: Slovenia, Poland, the Czech Republic and Hungary, and is based on the EU‐SILC (European Union Statistics on Income and Living Conditions) 2005 data‐set providing for each household information as to the received inter‐household cash transfers and among which regular cash support from households in other countries (i.e. remittances) are included. The results show that remittances are statistically significant in terms of poverty reduction even if their effects are generally smaller than those of welfare transfers. Furthermore, the impact of remittances and welfare transfers differ across the countries considered.