MIGRATION, REMITTANCES AND ECONOMIC GROWTH: AN EMPIRICAL STUDY IN THE CASE OF FORMER SOVIET REPUBLICS

Abstract

Over the last decade, an international inflow of remittances throughout the world has increased significantly, becoming the second largest source of foreign financial receipts. It is generally accepted that migrants’ transfers have the potential to benefit recipient countries. The empirical evidence of earlier studies provides controversial conclusions; the literature did not give special attention to the case of the the post-Soviet region. This may be related to the fact that countries of the former Soviet Union did not use to record the relevant data on remittances in their balances of payments. The purpose of this paper is to investigate empirically the role of remittances in economic growth in former Soviet republics for the period of 2002 through 2010, using a panel data set. Our analysis will cover eleven countries, excluding those that do not report data on remittances and Russia. The key finding of the paper reveals that migrants’ transfers do not directly facilitate output growth in former Soviet republics. Migrants act as altruistic individuals and their financial relations with those who remain in places of origin occur under asymmetric information. We admit the fact that our analysis is based upon the official data on remittances that are recorded in countries’ balances of payment. We do not take into consideration unrecorded and informal inflows, which may account for about half of all remittances sent to migrant-sending nations worldwide, and the post-Soviet region is not an exception.