- Milan Cuc, Erik Lundback, and Edgardo Ruggiero
- Published Date:
- January 2006
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For a succinct and comprehensive review of the literature on remittances, see Bouhga-Hagbe (2004).
However, causality may play a role in these results. People usually migrate for lack of better opportunities at home. Thus, one would expect a negative correlation, a priori, between the real rate of economic growth and the amount of remittances.
The research was carried out in two stages. The first stage was a qualitative study including focus groups and in-depth interviews with migrants, their family members, and sector experts (e.g., train and bus conductors, and employees of relevant government agencies). Focus groups were used to gain insights into the behavior of migrants and their families. This allowed the survey agency to better define the questionnaire for interviewees and the interview guide for interviewers. The second stage was a public opinion poll, conducted in October 2004, based on a sample of 3,714 households, of which 1,006 had at least one migrant. The sample was stratified (e.g., urban and rural localities, size of localities) and randomly chosen.
The Ministry of Education estimates that, as a result of migration, during the 2004/2005 academic year, 23,000 Moldovan children were left without both parents and under the care of relatives, older siblings, or friends (Pro-Didactica, 2004).
These are either seasonal migrants, the largest component; migrants who are momentarily in Moldova to retrieve documents, finalize emigration papers, or take care of personal or family affairs or business; or migrants who have to spend some time in their home country to get a visa renewal (e.g., migrants to Turkey).
Unless specified otherwise, figures in the remainder of this chapter refer to the migrant contingent.
Widowers also migrate less permanently than divorced migrants. This suggests a relation of causality between migration and the divorce rate, a fact that is confirmed by the qualitative research.
As discussed in Chapter 2, permanent residents are those migrants who, from the balance of payments point of view, transfer remittances. The second and third categories are essentially exporting services for a period of time shorter than one year and, from the balance of payments point of view, their transfers are classified as compensation of employees.
The slowdown in emigration in 2001 as shown in Figure 10 reflects tighter police controls in Russia, in the aftermath of terrorist acts related to the second Chechen war, and lower emigration to Italy, probably owing to tighter controls before the enactment of a new immigration law in June 2002.
This explains why 60 percent of migrants go to Russia, but only one-fourth of the remittances come from the CIS. Also, the majority of migrants to CIS countries are seasonal or temporary migrants.
Temporary workers can then be divided into two groups: (1) seasonal migrants and (2) nonpermanent migrants who have been abroad for less than one year.
See IMF (1993, paragraphs 269–72, 302, and 352–55).
The data problems related to measuring workers’ remittances are widely acknowledged in the literature. See, for instance, Chami, Fullenkamp, and Jahjah (2003); and Rapoport and Docquier (forthcoming).
Data for Turkmenistan and Uzbekistan are not available.
GNI is defined as GDP plus the net factor income of residents from abroad, and GNDI is defined as GNI plus net current transfers received from abroad (see, e.g., IMF, 1998).
According to Rapoport and Docquier (forthcoming), this network effect is well documented in the sociological literature.
Rapoport and Docquier (forthcoming) present a model of economic growth and remittances in which a country ends up in a long-run equilibrium with continuing migration and little investment if the costs of migration are low and the entry costs for investing and becoming an entrepreneur are high—a situation very pertinent to Moldova.
There are few formal studies on the effects of emigration on wages. Mishra’s (2004) econometric analysis finds a strong positive effect of emigration on wages in Mexico.
Yang (2004) finds that in the Philippines remittances are indeed invested in education.
As previously noted, when foreign currency in the informal sector is brought into the formal balance of payments, this could reflect previous balance of payments transactions (e.g., cash remittances in the late 1990s may appear in the balance of payments in 2004 as “errors and omissions”).
The values for elasticity of substitution (0.81) and elasticity of transformation (0.95) are averages of estimates for 60 countries derived by Devarajan, Go, and Li (1999) using various approaches. In calculating the averages, we have included only those estimates that are statistically significant at 90 percent confidence level: 253 estimates for elasticity of substitution and 87 estimates for elasticity of transformation.
The lower bound for the range corresponds to a 90 percent likelihood (based on Devarajan, Go, and Li, 1999) that the equilibrium REER is above this level.
It is true that with the labor market balance tighter as a result of the labor exodus, real wages rose rapidly (see the discussion of the labor market in Section C of this chapter) as did overall labor income subject to taxation. Nevertheless, it is probable that some of this increase has been at the expense of higher business profits and that overall GDP growth might have been higher with a larger labor force.
This trend is expected to be accentuated by the decision to phase in reductions in personal income and corporate profit tax rates in 2004–07.
All figures are on an annual basis.
The simulations assume that only one parameter at a time is selected for adjustment. If the necessary adjustment were to be achieved by adjusting all parameters simultaneously, the required change in each parameter would be less.
See Mishkin (2004) for a discussion of the requirements for inflation targeting.