Worker Remittances and Capital Flows to Developing Countries

Worker remittances constitute an increasingly important mechanism for the transfer of resources from developed to developing countries, and remittances are the second-largest source, behind foreign direct investment, of external funding for developing countries. Yet, literature on worker remittances has so far focused mainly on the impact of remittances on income distribution within countries, on the determinants of remittances at a micro-level, or on the effects of migration and remittances for specific countries or regions. The focus of this paper is thus on four questions: First, how important are worker remittances to developing countries in quantitative terms? Second, what are the determinants driving worker remittances? Third, how volatile are worker remittances to developing countries? Fourth, are remittances correlated to other capital flows?