Remittances’ side effects on economy: comparative approach of the Republic of Moldova and other ex-socialist countries

Abstract

The purpose of our research has been to ascertain and elaborate on why some countries could not take advantage of migrants’ remittances or even are experiencing some adverse side effects due to them. Moreover, the paper aims to identify an adequate set of policy recommendations for the remittances dependent countries. In order to elucidate the multiple implications of remittances, apart from introduction, literature review, and conclusions, we have structured the research into 3 sub-chapters, examining the connection between remittances and some macroeconomic issues, investment climate in remittances recipient countries, and drawing some policy recommendations. To generate and analyse data we have relied on both qualitative and quantitative secondary data analyses. For quantitative data, we used statistical analysis of relevant indexes elaborated by the World Bank and the Heritage Foundation. While for the qualitative approach, we used thematic analysis of the bibliographic sources. A major finding of our research is that there is a thin line between remittances’ pros and cons, since in fact almost every short-run advantage can turn out into a long-run side effect, primarily as a result of mismanagement and conspicuous consumption of these financial inflows, due to unfavorable business climate and decreased marginal propensity to investment of the population. Therefore, the benefits and adverse side effects of remittances are interdependent.