Migrant remittances and their impact on the economic development of the Baltic states

Abstract

This paper studies the determinants of international migration and remittances in the Baltic States (represented hereinafter by Lithuania, Latvia, and Estonia). The research reveals a critical view on migrant remittances in terms of macroeconomic development and social conditions in the society of each country involved into our research. In order to investigate and to demonstrate the impact of migrant remittances on GDP and consumption compared with current account balance, minimal wages, and foreign direct investment in the Baltic countries, econometric modeling based on the data of Eurostat, World Bank, and the National banks of the Baltic States has been employed. The results of this research clearly demonstrate that remittances sent by the migrants have high and positive impact on economic development in Lithuania, Latvia, and Estonia. Moreover, the findings stemming from this study confirm that minimum wages in the Latvia and Lithuania are far more important determinants of economic development than remittances.

The concept of labour migration from the perspective of Central and Eastern Europe

“…It has been discussed earlier that remittance serves as an engine for economic growth and better environment (Rausser et al, 2018). Gibson and McKenzie (2010) found that the typical yearly value of remittance is approximately 5000$.…”

“…These findings were supported by Simionescu (2016) and Kroeger (2015) as well. Inauspicious social environment evolved in every post-communist country since the 70's, but it remained tacit until the actual transition to market economy and democratisation had not started (Rausser et al;Papadopoulos, 2011).…”

“…However, upon the recovery of emigrants, the absorbed new abilities and ideas boost knowledge transfer in the origin countries, investing, spreading new technologies and launch new high-end products (Gibson & McKenzie, 2010). Emigrants' immaterial capital or "social remittances" are invaluably useful intangible resources: relationships, linguistic competence, and problem-solving sense and so on (Strielkowski et al, 2018). Rausser and his co-authors (2018) highlight another remarkable feature of these non-monetary remittances: they circulate upon visiting the emigrated relative and communicating with them.…”

“…(It refers to the money transferred from a Western European to an Eastern European country.) Earnings received in a foreign country but spent somewhere else raises purchasing power parity (Grenčiková et al, 2018) and thus leads to higher living standards (Rausser et al, 2018). However, the drawback attached to it is dependency.…”

“…Economics andSociology, 13(1), 197-216. doi: 10.14254/2071-789X.2020/13-1/13 might change their status depending on their own and their neighbours' economic and social conditions. Apart from poorer income prospects such as minimal wages (Rausser et al, 2018), ethnic incentives and cultural proximity are also expected to trigger migration. This assumption used to be highly prevalent after the political transition in Central and Eastern Europe (Favell & Hansen, 2002;Jileva, 2002) and after the end of the World War II (Schiffauer & Schiffauer, 2017).…”