As globalisation advances, it seems likely that migration flows and the resulting monetary flows to migrants' countries of origin will continue to increase.
This trend should provide an impetus to examine the issue of migrants' remittances closely, in order to derive the greatest possible benefits for developing countries. The answers to many questions related to the effect of remittances on development, poverty alleviation, income distribution and economic growth, remain vague and require further exploration.
To this end, particular emphasis will likely need to be placed on improving available data, which are currently insufficient. A binding agreement between central banks and the IMF on standardised definitions and methods for compiling data related to the balance of payments would help improve research results. In order to draw conclusions about actual net gains from migration and create meaningful policy recommendations, sound data are required.
Efforts should also be made to contain the costs associated with cross-border money transfers. Although the rates have decreased markedly in recent decades due to an increase in the volume of transfers, additional reductions are desirable. Increased competition in the remittance market could put more pressure on prices, which would lower fees and, in turn, strengthen the flow of funds to developing countries.
In summarising the current academic discourse, it can be said that additional income from remittances has a positive effect on poverty reduction, consumer spending and investment, in a variety of ways. The effect of remittances on income distribution, however, varies case by case. There is still a consensus that direct investment benefits the economies of developing countries most, because it can generate lasting structural change and economic growth. Nevertheless, the fact that remittances are primarily used to pay for daily living expenses is now being viewed in a more positive light: consumption may generate economic impulses which, in turn, can lead to economic development and enduring structural change. Increasing the use of remittances for savings and investment must be an objective of a broader economic strategy to optimise the investment climate in receiving countries.
However, it is impossible to come to a general conclusion about the impact of remittances on developing countries. Remittances play a different role in each country, depending on the given economic situation and the time frame in question. The short-term economic impulses and improvements in household income brought about by remittances do not automatically translate into economic development and a lasting means of alleviating poverty among the general population. For this to happen, long-term structural changes are needed.
Is the growing volume of remittances enough to offset the costs of migration, in particular, the loss of highly skilled labour? It is extremely difficult to quantify the amount of development potential lost to a national economy due to brain drain. The more lacking a country is in specialised personnel, the greater the effect. Pessimistic observers do not consider remittances adequate compensation for the loss of human capital, as they do not have the potential to generate as much productivity as the missing workers. Remittances, along with the gains from cyclical migration and diaspora communities certainly help cushion the loss of workers. However, it remains doubtful whether remittances can fully compensate for the loss or offer something of greater value.
