The Development And The Side Effects Of Remittances In The Cis Countries: The Case Of Ukraine

Remittances flowing from Ukrainian migrants working in high-income countries to Ukraine are an increasingly important source of extra income for migrants’ families. Given the increasing size of aggregate remittance inflows, they are also expected to be a potential source of funding for the social and economic development of Ukraine as a whole. If remittances enhance investment in physical and human capital and thus boost productivity, they can help mitigate the possible negative economic effects of rapid population decline and the aging of the Ukrainian population. Yet the potential benefits of remittances are likely to be matched by potential costs. Thus, two main issues are of interest with regard to remittances in Ukraine:  what are their benefits and costs for migrants’ families, local communities, the Ukrainian economy and society; and  how to harness their development potential while limiting any counterproductive side effects. This paper directly addresses these two questions. It does so by reporting first results from an ongoing effort to assess the potential development and unwanted side effects of remittances in Ukraine. These results come from a survey of the empirical literature in Ukraine and other transition economies and are supported, where possible, by the author’s contributions. The purpose of this work is to draw out evidence-based policy implications. Given that data on migration and remittances in Ukraine is incomplete and unreliable, we make use of all existing data sources on private transfers sent to Ukrainian households: data quality is consistently poor, but, we assume that it has similar biases over time. And we focus our analysis on relative changes in remittance inflows over time rather than on their absolute magnitude.