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Mr. Milan M Cuc, Mr. Erik J. Lundback, and Mr. Edgardo Ruggiero

Abstract

In today’s globalized world economy, economic integration goes beyond international trade and capital movements, and increasingly involves international labor mobility. An interesting illustration of this trend is Moldova, where large-scale labor emigration and associated workers’ remittance flows have played a dominant role in shaping the economic evolution in recent years. Although in Moldova much of the impetus for labor migration has come from unfavorable domestic conditions, the phenomenon is part of a wider trend of a growing movement of temporary and skilled workers across national borders.

Mr. Milan M Cuc, Mr. Erik J. Lundback, and Mr. Edgardo Ruggiero

Abstract

The growing body of literature on migration and remittances provides a useful framework to analyze these phenomena in Moldova, as well as to help with policy conclusions and recommendations.1 Analytically, this literature can be organized around three main topics: motivation behind remittances, use of remittances, and macroeconomic impact of migration and remittances.

Mr. Milan M Cuc, Mr. Erik J. Lundback, and Mr. Edgardo Ruggiero

Abstract

This chapter reports on the results of a survey of migration and remittances in Moldova. The survey was sponsored by the Chişinău offices of the International Organization for Migration and the Food Security Program of the European Commission, and developed by a survey agency (CBS AXA) in cooperation with the IMF resident representative office and the two sponsors. CBS AXA conducted the interviews, the focus groups, and the survey itself during September–November 2004.3

Mr. Milan M Cuc, Mr. Erik J. Lundback, and Mr. Edgardo Ruggiero

Abstract

The preceding section explored the motivation behind labor migration and remittances and their use in Moldova. This chapter turns to their macroeconomic consequences, introducing the topic by first looking at how the relevant economic concepts are defined, measured, and accounted for in the balance of payments statistics. Using Moldova balance of payments data, we present a few key stylized facts about Moldova that complement the detailed results of the household survey presented earlier. Discussion of macroeconomic consequences of labor migration and remittances follows.

Mr. Milan M Cuc, Mr. Erik J. Lundback, and Mr. Edgardo Ruggiero

Abstract

What challenges do remittances and labor migration pose for policymakers? Chapter 3 provided insights into what motivates Moldovans to seek employment abroad and how they make decisions about the amount and use of remittances. Chapter 4 discussed broader ramifications of these decisions for the performance of Moldova’s economy. Now we will discuss how policies can (1) influence decisions about labor migration and remittances, and (2) deal with risks that remittance inflows pose to macroeconomic stability.

Mr. Milan M Cuc, Mr. Erik J. Lundback, and Mr. Edgardo Ruggiero

Abstract

The behavior of Moldovan migrants is consistent with the stylized facts from the literature on the motivation behind remittances. In particular, Moldovan migrants appear to have a strong attachment to their home country and remit large portions of their earnings to their families. Thus, in the short to medium term, remittances are likely to remain a stable source of foreign exchange. Remittances are also likely to continue to boost household demand for consumption and investment in housing, as well as to provide a well-targeted social safety net. In the long term, as more migrants settle abroad, portfolio choice may become more important and migrants may decide to start saving and investing in their host country rather than remitting funds home.

Mr. Milan M Cuc, Mr. Erik J. Lundback, and Mr. Edgardo Ruggiero

Abstract

Labor migration and remittances, which have increasingly become a part of the global landscape, have profound economic and social consequences. Moldova, a small low-income country where an estimated one-third of the economically active population has been working abroad, is an interesting illustration of this trend. Drawing on household survey data, this Special Issues paper explains why Moldovan workers go abroad and how their remittances are used. With this background, it provides insights into policy challenges of coping with, and maximizing benefits from, international labor mobility and the large inflows of remittances.