International Migration Cycle and its Effect on Remittance Flows

Abstract

At present, according to the World Bank, the number of migrants (i.e. persons who live in a country other than their country of birth) is about 295 million people or 3.7% of the world population. At the same time, over the past 50 years, the number of migrants has more than tripled. The expansion of migration processes, as a rule, leads to an increase in the volume of cash transfers, both those sent by migrants to their families’ homeland (to the migrants’ donor country) and those received by the migrants themselves in the recipient country. This study examines the patterns of migration processes between the two countries (the migrants’ donor country and the recipient country) and found the three stages of migration cycle. The findings show that remittances depend nonlinearly on the stage of migration. During the first stage, when migrants decide to migrate and start to leave the donor country for the recipient country, the volume of remittances sent by migrants to their homeland increases, as does the volume of transfers in the opposite direction. During the second stage, when the recipient country becomes a key destination and the migrant diaspora expands significantly, the transfers sent by migrants increase, yet the received transfers decrease or stagnate. During the third stage, when a high degree of migrants’ naturalization is high, the volume of remittances sent to the homeland decreases (due to the relocation of migrant families), while the received ones, on the contrary, start growing amid the sale of assets in their homeland. Using data from the World Bank, the UN, and central (national) banks, this study determines the quantitative conditions for the transition from one stage to another based on the concentration of migration flows from the donor country and the share of migrants from a specific donor country to the total number of migrants living in the recipient country. Additional findings show that in some cases, when migrants do not intend to live permanently in the recipient country, the volumes of the sent transfers continue to grow, even at very high concentrations of migration flows.