Abstract
Hardly any studies have investigated the impact of migrant remittances on economic growth (EG) and inequality in the Western Balkans as a whole (WB6). Using the method of instrumental variables (VI), the findings show that while remittances influence economic growth, their inflow also promotes a high level of migration and absorbs a large workforce by influencing the labor market and encouraging uncontrolled individual relocation. This paper also reveals that although remittances have eased income inequalities the share of remittances in a country’s economy has declined over the years. After testing for the endogeneity of remittances and controlling for various variables, the results indicate that migrant workers’ remittances do not provide strong support for economic growth and inequality. For the sample average, a 1-percent rise in the share of remittances in the economy (i.e., to GDP) will lead to a 0.10-percent rise in the economic cycle i.e. GDP growth, respectively will lead to a 0.05-percent drop in the share of people living in inequality. The findings also show that the interactive effect of remittances and foreign direct investment is lower on economic growth and inequality than the individual effect of each factor.
Highlights
The remittances migrant workers send to their countries of origin are included among the factors with an established link with economic growth and income inequality at home
This paper has examined the effect of remittances on economic growth and reducing income inequality by considering data from six Western Balkan countries
The impact of remittances is been covered in previous literature, this paper generally complements the lack of literature on remittance-related issues in the WB6 region
Summary
The remittances migrant workers send to their countries of origin are included among the factors with an established link with economic growth and income inequality at home. Distinct from their hidden effects, some empirical records suggest remittances have positive links with economic growth and inequality, while others suggest the opposite. With migration steadily growing around the world, Western Balkan countries (the WB6) have seen a consid-. The interactive effects of remittances on economic growth and inequality in Western Balkan
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