The Determinants of Remittances in Southeast Europe

1
The Determinants of Remittances in Southeast
Europe

• Ana Bleahu, Jose de Sousa,
• Laetitia Duval and François-Charles Wolff
• (University of Bucharest Romania and CES,
  University of Paris 1 and University of Nantes
  France)

2
Motivation

• Remittances are one of the most visible
  consequences of emigration.
• - According to the World Bank, remittances are
  rapidly increasing from 119 billion in 1997 to
  317 billion in 2007
• - The proportion of remittances to developing
  countries is also increasing, from 60 (71
  billion) in 1997 to 75 in 2007 (240 billion).
• Remittances represent an important source of
  external financing and exceed
• - international aid flows
• - the volume of foreign direct investment for
  some countries.

3
The SEE context

• Since the beginning of the 1990s, international
  migration and remittances are important issues in
  the SEE.
• SEE region has experienced huge remittance flows
  over the last years, amounted to 39 billion in
  2007, more than double the level in 2003.
• Albania, Bosnia and Herzegovina and Moldova are
  among the world's main recipients of remittances
  as share of GDP.
• The amount of remittences received by Romania
  between 1995 and 2005 was multiply by 15
  (acording to the World bank)
• Despite their importance, few works have been
  devoted to
• the study the determinants of remittences in the
  SEE context.

4
Research question

• What are
• the determinants
• of international remittances
• received by SEE countries?
• Two stages
• - A first aims to identify the macroeconomic
  determinants of remittances.
• - A second aims to identify the microeconomic
  motives of remittances and their implications for
  the household recipients.

5
Theoretical approach

• What are the main motivations to remit?
• There are few alternative theories of
  remittances.
• Altruism migrants care of those left behind
  (Becker, 1974 Stark, 1995)
• Exchange migrants make transfers in returns for
  services (Berheim, 1985 Cox, 1987)
• Insurance migrants remit to diversify the
  sources of income at home (Rosenzweig, 1988).
• Loan repayment migrants send back remittances to
  reimburse family for the cost of migration and
  human capital (Cox and Jimenez, 1992 Poirine,
  1997 Ilahi and Jafarey, 2003).
• There is no consensus on the main motives for
  remitting!
• Remittances are driven by different motives
• but one element can be prevalent in the SEE!

6
We use Bilateral Data

• There is few but very recent literature
• Harisson, Britton and Swanson (2004) Ratha
  (2007) Lianos (1997) and Straubhaar (1986),
  Lueth and Ruiz-Arranz (IMF, 2006) Schiopu and
  Siegfried (ECB, 2006).
• We use three different sources
• National Bank of Romania (flows from 17 countries
  to Romania)
• National Bank of Albania (flows from 17 countries
  to Albania)
• National Bank of Italy (flows from Italy to
  Bulgaria, Serbia, Romania)
• Data are colected via
• 1. Banks reports for amounts received in banks
  accounts,
• 2. Reports of the money transfer companies such
  as Western Union and Money Gram
• 3. Reports of the National Post Office for
  amounts sent via postal orders

7
Empirical model

• Empirical model is based on
• Migrants education (average of education in a
  given host country)
• Bilateral distance (distance between host and
  origin)
• Bilateral factors
• Host countries (immigration policies, economic
  size, exchange rate, unemployment rate)
• Home countries factors (economic size, exchange
  rate, unemployment rate)

8
Conclusion

• European new immigration countries tend to remit
  more than European old immigration
• Education and geographic distance positivly
  influence remmitences
• Remittances are considered as implicit loan
  repayments taken out by Romanian emigrants to
  support migration and education costs.
• Highly educated migrants may compensate for the
  brain drain effect.

9
PERSONAL NETWORK MIGRANTSA case study a network
of migration
10
ILLEGAL MIGRATION Romanian illegal camp
Mallagrota in the forest close to Roma, Italy,
2006
50 Euro per month for renting itthey are
strong to not be easy destroyed by carabinieri
11
ROMA PEOPLE who are using other informal channel
for sending money back and other sources of
remittences
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RESTRICTIVE MIGRATION POLICIES

• In 2006, there were around 15000 recorded people,
  the most of them Romanians or Gypsies from
  Romania, who use to live in informal camps, on
  public or private place. They where more or less
  accepted.
• (data from Dipartmento, UO Emergenza Sociale ed
  Accoglienza)