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Ioana Schiopu

30 October 2006
WORKING PAPER SERIES - No. 688
Details
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.
JEL Code
D13 : Microeconomics→Household Behavior and Family Economics→Household Production and Intrahousehold Allocation
D64 : Microeconomics→Welfare Economics→Altruism, Philanthropy
F22 : International Economics→International Factor Movements and International Business→International Migration
F24 : International Economics→International Factor Movements and International Business→Remittances
O15 : Economic Development, Technological Change, and Growth→Economic Development→Human Resources, Human Development, Income Distribution, Migration