THE IMPORTANCE OF REMITTANCES FOR THE ECONOMIES OF MOLDOVA, ROMANIA, POLAND, AND UKRAINE

Abstract

The article examines the impact of remittances on the labor markets of Moldova, Ukraine, Romania, and Poland from 2019 to 2024. It shows that remittances are a significant part of Moldova’s and Ukraine's GDP, while Romania has a moderate dependence, and Poland increasingly became a donor country for remittances to Ukrainian households after 2022. Based on statistical data from the World Bank, IMF, OECD, IOM, National Bank of Ukraine, and National Bank of Poland, the changes in remittances as a percentage of GDP are tracked, and their relationship with employment levels is analyzed. The study reveals the contradictory effects of remittances: on one hand, they support household consumption and create opportunities for investments in human capital and entrepreneurship; on the other hand, they raise the risk of fostering a “rent-seeking culture” and decrease labor activity among certain population groups. It was found that increases in remittances are often linked with declines in economic activity and outflows of skilled workers. Special attention is given to how households use remittances and their impact on employment motivation. The article also addresses demographic challenges and structural issues in the labor markets of these countries, including the shortage of skilled labor in Moldova and Romania, and the economic changes in Poland driven by mass migration of Ukrainians after 2022. The study shows that remittances influence the economy through several channels: income effects, investments in human capital, support for entrepreneurship, stimulation of domestic demand, brain drain, and remittance dependency. It emphasizes the vulnerability of economies heavily reliant on remittances to external shocks, such as changes in migration policies, crises in donor countries, and exchange rate fluctuations. Lastly, it suggests public policy strategies aimed at transforming remittances from passive consumption sources into catalysts for long-term labor market development—by encouraging investment-oriented remittances, supporting migrant entrepreneurship, enhancing human capital quality, and establishing institutional mechanisms to direct remittances into productive investments that promote sustainable employment and economic growth.