The Role of Remittances in Migration Decision: Evidence from Turkish Migration

In this study we analyse the impact of workers' remittances on the decision to migrate by means of cointegration analysis. In traditional migration theories, especially in human capital models, the decision to migrate is based upon comparison of expected future incomes in the sending and the receiving countries adjusted for the cost of migration. By contrast, the new economics of labour migration suggests that the migration decision is made jointly by the migrant and his family. One important element of this theory is the role of remittances that is absent in traditional migration theories. In this paper we test traditional migration theories against the new economics of labour migration. The study covers the Turkish migration to Germany over the period 1964-2004. A single cointegrating relation between the migration inflows and the relative income ratio between Germany and Turkey, the unemployment rates in Germany and Turkey, the trade intensity variable, and workers' remittances (relative to Turkish GDP) is found. We find workers' remittances to be significant in explaining migration both in the short- as well as in the long-run.