Income Inequality in Host Countries and Remittances: A Discussion of the Determinants of Portuguese Emigrants' Remittances
| DOI | http://doi.org/10.1111/imig.12270 |
| Date | 01 October 2016 |
| Author | Paulo Reis Mourao |
| Published date | 01 October 2016 |
Income Inequality in Host Countries and
Remittances: A Discussion of the Determinants
of Portuguese Emigrants’Remittances
Paulo Reis Mourao*
ABSTRACT
The evolution of income inequality in host countries affects the migrants working there. As a
significant number of these migrants do not earn high incomes, this evolution tends to signifi-
cantly affect migrants’abilities to send money back to their home countries. We test this
hypothesis considering the evolution of income inequality in 59 countries with Portuguese
emigrants through observations from 1996 to 2014. Using the system generalized method of
moments (GMM) estimator, we found that an increase in income inequality leads to fewer
remittances per emigrant. We also controlled income inequality with several determinants of
remittances, including the real GDP per capita, unemployment rate, education skills, and the
self-employment rates of the host countries.
INTRODUCTION
For decades, remittances from Portuguese emigrants have constituted an important positive flow of
Portugal’s income accounts. If measured as a share of GDP, Portuguese emigrants’remittances
exhibit a relevant mean of approximately 2 per cent of Portugal’s GDP from 1990 to 2014 (far
from the means of Albania (17%), Lithuania (5%), or Bulgaria (3%), though above the 1 per cent
of Spain and Ireland).
According to historical data, during the 1950s, Portuguese emigrants’remittances amounted to 2
per cent of Portugal’s GDP. This value rose to 4 per cent during the 1960s and to 8.2 per cent dur-
ing the 1970s (Baganha, 2003; Giles, 2002). During the 1980s, the mean of Portuguese emigrants’
remittances amounted to approximately 10 per cent of Portugal’s GDP (Pereira, 1992; Giles, 2002).
However, for a complex set of reasons, the recent period has observed many Portuguese citizens
(and other European citizens from, for example, Spain and Ireland) leaving their home country to
search for jobs and to find better living conditions for their households (Baganha, 2003; Newland
et al., 2010; Pharoah and McKenzie, 2013). This emigration has significantly impacted the mone-
tary flows sent to their home countries as remittances.
Recent numbers prove that the remittances of more than five million of Portuguese living abroad
have increased in these recent years (PORDATA, 2015). For instance, the Bank of Portugal (2013)
computed a growth of 13 per cent between January 2012 and October 2012, 253 million Euros
more than between January 2011 and October 2011. The same report continues to identify France
and Switzerland as the main sources of these flows. France represents 32 per cent of this period’s
remittances, and Switzerland represents 24 per cent. Germany is usually the third source of
* University of Minho, Portugal
doi: 10.1111/imig.12270
©2016 The Author
International Migration ©2016 IOM
International Migration Vol. 54 (5) 2016
ISS N 00 20- 7985 Published by John Wiley & Sons Ltd.
To continue reading
Request your trial