Abstract
In the particular case of the Eastern Partnership (EaP) countries, migration plays an important role for their development, especially through the remittance channel, as they account for high shares in their gross domestic product (GDP). The geopolitical position of the EaP countries, in between the European Union (EU) and Russia, makes them more susceptible to shocks. Under this framework, this chapter aims at analysing how remittances can build on their resilience, thus acting as a bulwark against natural and political shocks that these countries might face. Running a fixed effects threshold panel data analysis, results indicate that the effect of natural disasters disappears for remittance ratios above 10% of GDP. While remittances also mitigate the impact of political conflicts, their impact is stronger in countries with less freedom. Policymakers should design friendlier remittance policies in order to help population cope with shocks and boost recovery. Nevertheless, as remittances may also cause macroeconomic destabilizing effects, reliance on remittances can be reduced by a shift towards more sustainable sources of growth through an increasing pace in political and economic reforms.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
Central Asia countries refer to Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan and Uzbekistan.
- 2.
Central and Eastern European (CEE) group includes the European Union (EU) members in Central and Eastern Europe: Bulgaria, Croatia, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia and Slovenia.
- 3.
As evidenced by the transition index computed by the European Bank for Reconstruction and Development (EBRD) for measuring the structural reform level (see Table 16.7 in Annex).
- 4.
The Visa Liberalisation Dialogues resulted in an exemption from EU visa requirement for Moldovan citizens in 2016. The same also applied for Georgian and Ukrainian citizens in 2017.
- 5.
In 2017 Russia was also the destination for over two-thirds of the emigration stock from CA countries.
- 6.
Data on emigration stock is also including Armenians in Nagorno-Karabakh which reaches about 15% of total Armenian diaspora in 2017. However, Russia is the main destination by far, hosting over half of Armenian immigrants in 2017.
- 7.
Russia is the main destination, hosting about a third of Moldavian diaspora (2017). Due to historic and cultural links, as well as proximity, Romania is also an important destination for about 16% of Moldavian emigration stock. The increasing flow towards Romania was also the result of the simplified procedures law citizenship in 2009 (Barbulescu 2013).
- 8.
Kirgiz Republic and Tajikistan are also placed in top position. With remittance inflows that amount to 35% and 31% of their GDP, this places them on first and third position worldwide (Ratha et al. 2018).
- 9.
The political tensions relating to the Nagorno-Karabakh region in Azerbaijan resumed in numerous conflicts: 1991–1995, 1997–1998, 2005, 2008, 2012 and 2014–2017.
- 10.
Given the data limitation, our sample includes the following transition countries: Armenia, Azerbaijan, Belarus, Georgia, Moldova (Eastern Partnership), Kazakhstan, Kyrgyzstan (Central Asia), Bulgaria, Croatia, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, Slovenia and Ukraine (EU members in Central and Eastern Europe) and Russia.
- 11.
On average, Belarus faced the higher inflation rates. On average, incomes in Belarus have depreciated with 52% over the 1997–2014 period (with the highest inflation level in 1999, 251%). Moldova and Ukraine were also facing average inflation rates over 10% over the same period.
- 12.
This decision derives from the joint significance test, as we could not reject the null hypothesis that these variables are jointly not different from zero.
- 13.
Given that the threshold regression of Hansen (1999) requires a balanced panel, we had to drop Tajikistan, Turkmenistan and Uzbekistan from our sample in order to maximize our time span.
- 14.
We have also computed additional simulations in order to check for nonlinearities in the impact of remittances on growth. Our results did not find evidence for the existence of one or two thresholds that makes the impact of remittances on growth to be different.
- 15.
More simulations were carried out to check for some possible transmission channels of the effects of remittances, like investments, human capital or transition index, but the threshold effect was only confirmed for a reduced number of variables including inflation and size of government.
References
Acosta, P. (2007). Entrepreneurship, Labour Markets and International Remittances: Evidence from El Salvador. In Ç. Özden & M. Schiff (Eds.), International Migration, Economic Development & Policy (pp. 141–160). Washington, DC; New York, NY; Basingstoke: Palgrave Macmillan; World Bank.
Acosta, P. A., Lartey, E. K. K., & Mandelman, F. S. (2009). Remittances and the Dutch Disease. Journal of International Economics, 79(1), 102–116. https://doi.org/10.1016/j.jinteco.2009.06.007.
Afonso, A., & Jalles, J. T. (2014). Fiscal Composition and Long-Term Growth. Applied Economics, 46(3), 349–358. https://doi.org/10.1080/00036846.2013.848030.
Azam, M. (2015). The Role of Migrant Workers Remittances in Fostering Economic Growth. International Journal of Social Economics, 42(8), 690–705. https://doi.org/10.1108/ijse-11-2013-0255.
Balli, F., & Rana, F. (2015). Determinants of Risk Sharing Through Remittances. Journal of Banking & Finance, 55, 107–116. https://doi.org/10.1016/j.jbankfin.2015.02.003.
Barbulescu, R. (2013). Naturalisation Procedures for Immigrants – Romania. Retrieved from http://cadmus.eui.eu/bitstream/handle/1814/29795/NPR_2013_17-Romania.pdf?sequence=1.
Barro, R. J. (2015). Convergence and Modernisation. The Economic Journal, 125(585), 911–942. https://doi.org/10.1111/ecoj.12247.
Barro, R. J., & Sala-i-Martin, X. (2004). Economic Growth. Cambridge, MA: MIT Press.
Bassanini, A., & Scarpetta, S. (2003). The Driving Forces of Economic Growth: Panel Data Evidence for the OECD Countries. OECD Economic Studies, 2001(2), 9–56. https://doi.org/10.1787/eco_studies-v2001-art10-en.
Béné, C., Newsham, A., Davies, M., Ulrichs, M., & Godfrey-Wood, R. (2014). Review Article: Resilience, Poverty and Development. Journal of International Development, 26(5), 598–623. https://doi.org/10.1002/jid.2992.
Bettin, G., & Zazzaro, A. (2017). The Impact of Natural Disasters on Remittances to Low- and Middle-Income Countries. The Journal of Development Studies, 54(3), 481–500. https://doi.org/10.1080/00220388.2017.1303672.
Bettin, G., Presbitero, A. F., & Spatafora, N. L. (2017). Remittances and Vulnerability in Developing Countries. The World Bank Economic Review, 31(1), 1–23. https://doi.org/10.1093/wber/lhv053.
Blouchoutzi, A., & Nikas, C. (2010). The Macroeconomic Implications of Emigrants’ Remittances in Romania, Bulgaria and Albania. Post-Communist Economies, 22(4), 547–558. https://doi.org/10.1080/14631377.2010.518479.
Bond, S., Hoeffle, A., & Jonathan, T. (2001). GMM Estimation of Empirical Growth Models. Discussion Paper Series. London: Centre for Economic Policy Research. Retrieved from http://cepr.org/active/publications/discussion_papers/dp.php?dpno=3048.
Brubaker, R. (1995). Aftermaths of Empire and the Unmixing of Peoples: Historical and Comparative Perspectives. Ethnic and Racial Studies, 18(2), 189–218. https://doi.org/10.1080/01419870.1995.9993861.
Catrinescu, N., Leon-Ledesma, M., Piracha, M., & Quillin, B. (2009). Remittances, Institutions, and Economic Growth. World Development, 37(1), 81–92. https://doi.org/10.1016/j.worlddev.2008.02.004.
Cavalcanti, T. V. D. V., Mohaddes, K., & Raissi, M. (2011). Growth, Development and Natural Resources: New Evidence Using a Heterogeneous Panel Analysis. The Quarterly Review of Economics and Finance, 51(4), 305–318.
Cavallo, E., & Noy, I. (2010). The Economics of Natural Disasters: A Survey. IDB Working Paper Series. Washington, DC: Inter-American Development Bank, Research Department.
Chami, R., Fullenkamp, C., & Jajah, S. (2003). Are Immigrant Remittance Flows a Source of Capital for Development? IMF Working Paper (189).
Chami, R., Hakura Dalia, S., & Montiel Peter, J. (2012). Do Worker Remittances Reduce Output Volatility in Developing Countries? Journal of Globalization and Development, 3(1), 1–25.
Cojocaru, L., Falaris, E. M., Hoffman, S. D., & Miller, J. B. (2015). Financial System Development and Economic Growth in Transition Economies: New Empirical Evidence from the CEE and CIS Countries. Emerging Markets Finance and Trade, 52(1), 223–236. https://doi.org/10.1080/1540496x.2015.1013828.
Combes, J.-L., Ebeke, C. H., Etoundi, S. M. N., & Yogo, T. U. (2014). Are Remittances and Foreign Aid a Hedge Against Food Price Shocks in Developing Countries? World Development, 54, 81–98. https://doi.org/10.1016/j.worlddev.2013.07.011.
Danzer, A. M., & Ivaschenko, O. (2010). Migration Patterns in a Remittances Dependent Economy: Evidence from Tajikistan During the Global Financial Crisis. Migration Letters, 7(2), 190–202.
David Antonio, C. (2011). How Do International Financial Flows to Developing Countries Respond to Natural Disasters? Global Economy Journal, 11(4), 1–38.
Duval, L., & Wolff, F.-C. (2010). Remittances Matter: Longitudinal Evidence from Albania. Post-Communist Economies, 22(1), 73–97. https://doi.org/10.1080/14631370903525611.
Ebeke, C., & Combes, J.-L. (2013). Do Remittances Dampen the Effect of Natural Disasters on Output Growth Volatility in Developing Countries? Applied Economics, 45(16), 2241–2254. https://doi.org/10.1080/00036846.2012.659347.
EC & HRUFASP. (2015). Review of the European Neighbourhood Policy. Communication, JOIN 50 final. Brussels: European Commission and High Representative of the Union for Foreign Affairs and Security Policy.
Feenstra, R. C., Inklaar, R., & Timmer, M. P. (2015). The Next Generation of the Penn World Table. American Economic Review, 105(10), 3150–3182.
Giuliano, P., & Ruiz-Arranz, M. (2009). Remittances, Financial Development, and Growth. Journal of Development Economics, 90(1), 144–152. https://doi.org/10.1016/j.jdeveco.2008.10.005.
Gleditsch, N. P., Wallensteen, P., Eriksson, M., Sollenberg, M., & Strand, H. (2002). Armed Conflict 1946–2001: A New Dataset. Journal of Peace Research, 39(5), 615–637. https://doi.org/10.1177/0022343302039005007.
Green, T., & Winters, L. A. (2012). Economic Crises and Migration: Learning from the Past and the Present. In I. Sirkeci, J. H. Cohen, & D. Ratha (Eds.), Migration and Remittances During the Global Financial Crisis and Beyond (pp. 35–52). Washington, DC: World Bank.
Greene, W. H. (2000). Econometric Analysis. Upper Saddle River, NJ: Econometric Software.
Guha-Sapir, D., Below, R., & Hoyos, P. (2018). CRED, EM-DAT – The Emergency Events Database. Centre for Research on the Epidemiology of Disasters. Retrieved from Centre for Research on the Epidemiology of Disasters https://www.emdat.be.
de Haas, H. (2012). The Migration and Development Pendulum: A Critical View on Research and Policy. International Migration, 50(3), 8–25. https://doi.org/10.1111/j.1468-2435.2012.00755.
Hallegatte, S., Vogt-Schilb, A., Bangalore, M., & Rozenberg, J. (2016). Unbreakable: Building the Resilience of the Poor in the Face of Natural Disasters. Washington, DC: World Bank.
Hansen, B. E. (1999). Threshold Effects in Non-Dynamic Panels: Estimation, Testing, and Inference. Journal of Econometrics, 93(2), 345–368. https://doi.org/10.1016/S0304-4076(99)00025-1.
Hsiao, C. (2007). Panel Data Analysis—Advantages and Challenges. Test, 16(1), 1–22. https://doi.org/10.1007/s11749-007-0046-x.
IHME. (2015). Global Educational Attainment 1970–2015. Institute for Health Metrics and Evaluation.
IMF-WEO. (2018). IMF World Economic Outlook Database from International Monetary Fund. Retrieved from https://www.imf.org/external/pubs/ft/weo/2018/02/weodata/index.aspx.
Incaltarau, C., & Maha, L. G. (2012). The Impact of Remittances on Consumption and Investment in Romania. Eastern Journal of European Studies, 3(4), 31–86.
Iradian, G. (2007). Rapid Growth in the CIS: Panel Regression Approach. IMF Working Paper. International Monetary Fund.
Jawaid, S. T., & Raza, S. A. (2016). Effects of Workers’ Remittances and Its Volatility on Economic Growth in South Asia. International Migration, 54(2), 50–68. https://doi.org/10.1111/imig.12151.
Kaufmann, D., Kraay, A., & Mastruzzi, M. (2010). The Worldwide Governance Indicators: Methodology and Analytical Issues. World Bank Policy Research Working Paper, 5430.
Korosteleva, E. (2017). Eastern Partnership: Bringing “the Political” Back in. East European Politics, 33(3), 321–337. https://doi.org/10.1080/21599165.2017.1340882.
Kumar, R. R., Stauvermann, P. J., Patel, A., & Prasad, S. (2018). The Effect of Remittances on Economic Growth in Kyrgyzstan and Macedonia: Accounting for Financial Development. International Migration, 56(1), 95–126. https://doi.org/10.1111/imig.12372.
Lartey, E. K. K. (2013). Remittances, Investment and Growth in Sub-Saharan Africa. The Journal of International Trade & Economic Development, 22(7), 1038–1058. https://doi.org/10.1080/09638199.2011.632692.
Liu, X., Song, H., & Romilly, P. (1997). An Empirical Investigation of the Causal Relationship Between Openness and Economic Growth in China. Applied Economics, 29(12), 1679–1686. https://doi.org/10.1080/00036849700000043.
Loayza, N. V., Olaberría, E., Rigolini, J., & Christiaensen, L. (2012). Natural Disasters and Growth: Going Beyond the Averages. World Development, 40(7), 1317–1336. https://doi.org/10.1016/j.worlddev.2012.03.002.
Mankiw, N. G., Romer, D., & Weil, D. N. (1992). A Contribution to the Empirics of Economic Growth. The Quarterly Journal of Economics, 107(2), 407–437. https://doi.org/10.2307/2118477.
Martin, R., & Sunley, P. (2015). On the Notion of Regional Economic Resilience: Conceptualization and Explanation. Journal of Economic Geography, 15(1), 1–42. https://doi.org/10.1093/jeg/lbu015.
Mehmet, M., Ismet, G., Sahin, B., & Metin, D. A. M. (2013). The Effect of Openness on Economic Growth for BRIC-T Countries & 58; Panel Data Analysis. Eurasian Journal of Business and Economics, 6(11), 1–14.
Mishkin, F. S. (2011). Over the Cliff: From the Subprime to the Global Financial Crisis. Journal of Economic Perspectives, 25(1), 49–70. https://doi.org/10.1257/jep.25.1.49.
Mohapatra, S., Joseph, G., & Ratha, D. (2012). Remittances and Natural Disasters: Ex-Post Response and Contribution to Ex-Ante Preparedness. Environment, Development and Sustainability, 14(3), 365–387. https://doi.org/10.1007/s10668-011-9330-8.
Narayan, P. K., Narayan, S., & Mishra, S. (2011). Do Remittances Induce Inflation? Fresh Evidence from Developing Countries. Southern Economic Journal, 77(4), 914–933. https://doi.org/10.4284/0038-4038-77.4.914.
Naudé, W. A., & Bezuidenhout, H. (2014). Migrant Remittances Provide Resilience Against Disasters in Africa. Atlantic Economic Journal, 42(1), 79–90. https://doi.org/10.1007/s11293-014-9403-9.
Pettersson, T., & Eck, K. (2018). Organized Violence, 1989–2017. Journal of Peace Research, 55(4), 535–547. https://doi.org/10.1177/0022343318784101.
Raschky, P. A., & Schwindt, M. (2016). Aid, Catastrophes and the Samaritan’s Dilemma. Economica, 83(332), 624–645. https://doi.org/10.1111/ecca.12194.
Ratha, D., De, S., Kim, E. J., Plaza, S., Schuettler, K., Seshan, G., & Yameogo, N. D. (2018). Migration and Remittances. Recent Developments and Outlook. Migration and Development Brief, 29.
Senbeta, A. (2013). Remittances and the Sources of Growth. Applied Economics Letters, 20(6), 572–580. https://doi.org/10.1080/13504851.2012.718057.
Sensier, M., Bristow, G., & Healy, A. (2016). Measuring Regional Economic Resilience across Europe: Operationalizing a Complex Concept. Spatial Economic Analysis, 11(2), 128–151. https://doi.org/10.1080/17421772.2016.1129435.
Siljak, D., & Nagy, S. G. (2019). Economic Convergence of the Eastern Partnership Countries Towards the EU-13. Eastern Journal of European Studies, 9(2), 169–185.
Solow, R. M. (1956). A Contribution to the Theory of Economic Growth. The Quarterly Journal of Economics, 70(1), 65–94. https://doi.org/10.2307/1884513.
Taylor, E. J. (1999). The New Economics of Labour Migration and the Role of Remittances in the Migration Process. International Migration, 37(1), 63–88. https://doi.org/10.1111/1468-2435.00066.
Tehseen Jawaid, S., & Raza, S. A. (2012). Workers’ Remittances and Economic Growth in China and Korea: An Empirical Analysis. Journal of Chinese Economic and Foreign Trade Studies, 5(3), 185–193. https://doi.org/10.1108/17544401211263946.
Teixeira, A. A. C., & Queirós, A. S. S. (2016). Economic Growth, Human Capital and Structural Change: A Dynamic Panel Data Analysis. Research Policy, 45(8), 1636–1648. https://doi.org/10.1016/j.respol.2016.04.006.
Tiganasu, R., & Simionov, M. L. (2019). Resilience at the EU’s Eastern Borders: A Comparative Analysis of Post-Soviet Countries through an Institutional Approach. In: G. Rouet & G. Pascariu (Eds.), Resilience and the EU’s Eastern Neighbourhood Countries. From Theoretical Concepts to a Normative Agenda. New York: Palgrave Macmillan.
United Nations. (2017). Trends in International Migrant Stock: Migrants by Destination and Origin. Retrieved from United Nations, Department of Economic and Social Affairs, Population Division http://www.un.org/en/development/desa/population/migration/data/estimates2/estimates17.asp.
Vinayagathasan, T. (2013). Inflation and Economic Growth: A Dynamic Panel Threshold Analysis for Asian Economies. Journal of Asian Economics, 26, 31–41. https://doi.org/10.1016/j.asieco.2013.04.001.
Viner, R. M., Hargreaves, D. S., Ward, J., Bonell, C., Mokdad, A. H., & Patton, G. (2017). The Health Benefits of Secondary Education in Adolescents and Young Adults: An International Analysis in 186 Low-, Middle- and High-Income Countries from 1990 to 2013. SSM – Population Health, 3, 162–171. https://doi.org/10.1016/j.ssmph.2016.12.004.
Woodruff, C., & Zenteno, R. (2007). Migration Networks and Microenterprises in Mexico. Journal of Development Economics, 82(2), 509–528. https://doi.org/10.1016/j.jdeveco.2006.03.006.
Wooldridge, J. M. (2002). Econometric Analysis of Cross Section and Panel Data. Cambridge: MIT Press.
World Bank. (2017). Migration and Mobility. Washington, DC: World Bank Group.
World Bank. (2018). World Development Indicators. World Bank Group. Retrieved from https://databank.worldbank.org/data/source/world-development-indicators.
Yang, D. (2008). Coping with Disaster: The Impact of Hurricanes on International Financial Flows, 1970–2002. The B.E. Journal of Economic Analysis & Policy, 8(1), 1–45.
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Annexes
Annexes
Rights and permissions
Copyright information
© 2019 The Author(s)
About this chapter
Cite this chapter
Incaltarau, C., Pascariu, G.C. (2019). Migration and Resilience in the Eastern European Neighbourhood: Remittances as a Mechanism for Boosting Recovery After Shocks. In: Rouet, G., Pascariu, G.C. (eds) Resilience and the EU’s Eastern Neighbourhood Countries. Palgrave Macmillan, Cham. https://doi.org/10.1007/978-3-030-25606-7_16
Download citation
DOI: https://doi.org/10.1007/978-3-030-25606-7_16
Published:
Publisher Name: Palgrave Macmillan, Cham
Print ISBN: 978-3-030-25605-0
Online ISBN: 978-3-030-25606-7
eBook Packages: Economics and FinanceEconomics and Finance (R0)