Determinants of Workers' Remittances: Evidence from the European Neighbouring Region

36 Pages Posted: 9 Nov 2006

See all articles by Ioana C. Schiopu

Ioana C. Schiopu

ESADE Ramon Llull University - Department of Economics

Nikolaus Siegfried

European Central Bank

Date Written: October 2006

Abstract

Workers' remittances have become the second largest source of net financial flows to developing countries. However, the main motives for sending remittances remain controversial. This paper examines the importance of altruistic versus investment motives using a new panel data set of bilateral flows from 21 Western European to 7 EU neighbouring countries. We find that altruism is important for remitting, as the GDP differential between sending and receiving countries is positively correlated with the average remittance per migrant. By contrast, interest rate differentials are insignificant, suggesting a weak investment motive. Finally, migrants' skills raise remittances, while a large informal economy in the sending country depresses official remittance flows.

Keywords: migration, remittances, migrants' skills, altruism, balance of payments

JEL Classification: D13, D64, F22, F24, O15

Suggested Citation

Schiopu, Ioana C. and Siegfried, Nikolaus, Determinants of Workers' Remittances: Evidence from the European Neighbouring Region (October 2006). ECB Working Paper No. 688. Available at SSRN: https://ssrn.com/abstract=936947

Ioana C. Schiopu (Contact Author)

ESADE Ramon Llull University - Department of Economics ( email )

Av. de Pedralbes, 60-62
Barcelona, 08034
Spain

HOME PAGE: http://profesores.esade.edu/ioanaschiopu

Nikolaus Siegfried

European Central Bank ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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