Remittances and Development Strategies

Introduction

Migration is a key aspect of modern development processes and is deeply connected to economic outcomes. Remittances specifically can be linked to beneficial development implications, such as poverty alleviation, better household consumption, or economic stability. Mobility can be associated with predictable economic outcomes by particularly focusing on remittances. However, this raises an important analytical question: do similar patterns of migration and remittance inflows play similar roles in different economic and institutional settings? While countries may exhibit comparable levels of outmigration or remittance dependence, how these flows are structured, governed, and integrated into national economies can vary.

The following paper addresses this issue through a comparison of Bangladesh and Romania, two cases characterized by significant emigration and substantial remittance inflows. Still, they are embedded in distinct political-economic contexts. Rather than treating migration as an inherently developmental mechanism, the paper examines how similar migration dynamics are differently incorporated into national development trajectories. It argues that the developmental role of migration is not uniform, but contingent upon the ways in which it is institutionalized, temporally situated, and integrated within broader structures of the economy.

Understanding the Migration-Development Nexus

The migration-development nexus refers to the set of interactions through which migration processes influence, and are influenced by, economic development. Rather than implying a linear or causal relationship, the concept captures a multi-directional and dynamic interaction between mobility, economic structures, and policy frameworks (De Haas, 2010, pp. 237-248).

The relationship between migration and development has been a subject of debate for a long time. Early perspectives often assumed a direct causal link, where labor mobility and remittances were seen as beneficial for economic growth (Stark & Lucas, 1985, pp. 913-915). These optimistic accounts viewed migration as a mechanism for efficient labor allocation and capital transfer, with remittances expected to stimulate investment and growth (Ibidem). They have been influential in policy circles, such as recommendations directed by the World Bank (see World Bank Group, Policy Research Reports).

In contrast, structuralist approaches emphasized the unequal nature of global labor markets, arguing that migration can reproduce underdevelopment by reinforcing peripheral dependence on external economies (Castles & Kosack, 1973, pp. 27-28). Over time, however, scholars have emphasized the complex and mediated nature of this relationship, highlighting that similar migration patterns can produce divergent developmental outcomes depending on institutional or temporal contexts (De Haas, 2012, pp. 14-18). Therefore, migration is neither inherently beneficial nor detrimental to development, but produces outcomes that depend on broader structural conditions.

Within this debate, remittances have emerged as a central analytical focus. Remittances refer to money sent by migrants working abroad to their country of origin. These operate at both the micro level (consumption, investments, housing, social mobility), and the macro level (foreign exchange stabilization and potentially broader economic growth). Analytically distinct from development outcomes, their effects depend on how they are used, distributed, and integrated into the broader economy.

A large body of empirical research demonstrates that remittances contribute to poverty reduction, consumption smoothing, and improvements in household welfare, particularly in low and middle-income countries (Adams & Page, 2005, pp. 1655-1660). At the same time, their impact on long-term economic transformation remains contested. Studies show that remittances are often directed towards consumption, housing, and education, with more limited effects on productive investment and structural change (Chami & International Monetary Fund, 2008, pp. 7-8). This led to increasing recognition that remittances function as support mechanisms, rather than engines of development.

Migration is embedded within networks of institutions, households, and labor markets, which shape both the scale and impact of migration (Massey, 1990, pp. 8-10). A migration system encompasses sending and receiving communities, regulatory frameworks, and formal or informal recruitment mechanisms (Ibidem). Understanding these systems allows for the identification of how and why migration flows become structured differently, and how they interact with broader economic and social processes. In Bangladesh, migration has become a structured, state-facilitated system, producing predictable flows of labor and remittances. In Romania, migration emerged more spontaneously in the context of post-socialist restructuring and was later incorporated into regulatory and policy frameworks. By comparing these systems, we can investigate how institutional embedding shaped the functional role of migration in development trajectories.

Despite the growing consensus that the migration-development nexus is context-dependent, two limitations remain. First, much of the empirical work either focuses on single-country case studies or relies on large-N qualitative analyses, which tend to miss how similar migration dynamics may be differently integrated into national development trajectories. Second, while existing studies acknowledge the importance of institutions, they pay less attention to the degree and form of institutional embedding of migration and remittances.

Designing the Analysis

This paper employs a comparative case study design to analyze how migration and remittances are integrated into national development trajectories. Specifically, it focuses on Bangladesh and Romania, two countries with differences in their economic structures, institutional contexts, and positions within global value chains. But they share a common feature of substantial labor outmigration and remittance inflows.

The purpose of this analysis is to examine whether similar migration dynamics are associated with comparable roles across contrasting contexts. This approach helps the identification of variation in how migration is embedded within broader economic systems, rather than assuming a uniform migration-development relationship.

To ensure a systematic comparison, the paper is operationalized through a set of interconnected analytical dimensions to capture both the scale and the function of migration in each case. First, the economic weight of remittances is used to assess their macroeconomic significance, measured through their share of GDP. This way, we can evaluate whether remittances constitute a central or peripheral component of the national economy. Second, the migration regime captures the structural characteristics of migration flows, including their temporality and skill composition, as well as their primary destinations. This dimension is used for understanding the extent to which migration generates continuous, circular flows of remittances or leads to more permanent forms of labor mobility. Third, the analysis considers the degree of institutional embedding, referring to how migration is incorporated into formal policy frameworks and regulatory structures, including state facilitation mechanisms.

The data sources are primarily taken from World Bank reports, as well as other international organizations, such as the International Labor Organization or the International Organization for Migration. In parallel, qualitative data is used to contextualize these figures within broader institutional and policy frameworks, such as academic studies or policy reports, which provide insight into how migration is governed, organized, and integrated.

Bangladesh - Migration as Development Infrastructure

The case of Bangladesh illustrates a form of development in which migration is not merely a response to economic conditions, but a structurally embedded component of the national economy. Over the past decades, large-scale labor migration, primarily directed towards Gulf states, has evolved into a system that links households, state institutions, and global labor markets in a relatively stable configuration. A defining feature of this system is the centrality of remittances. Recent data indicate that remittance inflows reached approximately $27.5 billion in the year 2024, accounting for around 6.5% of GDP and nearly half of import financing, estimated at $54.7 billion (World Bank, 2024). This places remittances among the most important external financial flows, exceeding foreign aid and rivaling export earnings in their stabilizing function. More broadly, Bangladesh consistently ranks among the top global remittance recipients, with flows exceeding $20 billion annually (Global Economy, 2026).

Remittances function as a critical source of foreign exchange, directly contributing to balance-of-payments stability and reserve accumulation. Empirical studies show that remittance inflows have played a significant role in sustaining foreign currency reserves and even mitigating external vulnerability during periods of economic stress (Md. Waliullah, 2026, p. 251). In this sense, migration operates as a de facto external financing mechanism, compensating for structural trade imbalances.

At the same time, the migration system is actively shaped by the state. The evolution of migration here demonstrates a gradual, but clear, process of institutional embedding. State involvement expands in parallel with the growth of migration flows, as can be seen in Figure 1. Beginning with the establishment of the Bureau of Manpower, Employment and Training in 1976, the state assumed a coordinating role in facilitating overseas employment. This was followed by the Emigration Ordinance of 1982, which introduced a formal legal framework and established state authority over recruitment regulation of private agencies and the development of administrative procedures. By the early 2000s, migration had been explicitly incorporated into national policy through the Overseas Employment Policy, reflecting its growing economic significance. This trajectory culminated in the Overseas Employment and Migrants Act, which strengthened regulatory oversight and worker protections, and was followed by further efforts to modernize migration management through digitalization.

This sequential expansion of state involvement transformed migration from an ad-hoc economic activity into a structured and mediated system. In turn, it contributed to the large-scale deployment of predominantly low- and semi-skilled workers on temporary contracts, particularly in the Gulf region (IOM, 2025, p. 3). The temporality of these migration patterns reinforces a cyclical dynamic in which workers return and re-emigrate, sustaining continuous remittance flows.

At the household level, remittances play a multifunctional role. Survey data indicate that a substantial share of remittance income is allocated to basic consumption, such as food or housing, alongside investments in land, education, and savings (ILO & Gov. Bangladesh, 2016, p. 42). This dual function, both consumptive and productive, is reflected in the literature, which finds that remittances contribute to poverty reduction, increased household resilience, and improved access to education and healthcare (Ahmed, 2025, pp. 220-221; Rahman & Moni, 2019, pp. 62-62; Raihan et al., 2009, pp. 25-26). However, the developmental effects of remittances are not linear. Some studies highlight a non-linear relationship between remittances and economic growth, in which early inflows were often used unproductively (Datta & Sarkar, 2014, pp. 5-8). At the same time, later periods saw more investment-oriented use of remittances (Hassan & Shakur, 2017, p. 9). This suggests that the impact of remittances depends on broader institutional and economic conditions, rather than being inherently growth-enhancing.

Despite their stabilizing role, remittances also reveal structural limitations. A significant portion of migration is concentrated in low-skilled sectors, and the economy remains reliant on external labor markets rather than domestic structural transformation (ILO & Gov. Bangladesh, 2016, pp. 10-20). Moreover, the dependence on specific destination regions, particularly the Gulf, introduces vulnerabilities linked to geopolitical and labor market fluctuations (Ibidem).

These dynamics point to a development model in which migration and remittances function as an invisible infrastructure of economic reproduction. Rather than serving as a temporary supplement, they underpin macroeconomic stability, sustain household livelihoods, and compensate for structural constraints within the domestic economy. In Bangladesh, migration is not external to development, but constitutive of it.

Romania - Migration within Systemic Transformation

Migration in Romania emerged primarily as a response to systemic transformation. Following the collapse of socialism in 1989, economic restructuring, labor market dislocations, and declining real wages contributed to significant outward migration throughout the 1990s and early 2000s (Sandu, 2010, pp. 12-17; World Bank, Net Migration, 2025).

A major inflection point occurred with Romania’s accession to the EU in 2007, which facilitated large-scale labor mobility toward Western Europe, particularly Italy and Spain (Idem). Unlike the predominantly temporary and circular migration observed in Bangladesh, Romanian migration patterns became increasingly diversified and semi-permanent, including both low-skilled and highly skilled workers (OECD, 2024).

Remittances played a significant but time-bound role in this process. During the mid-2000s, Romania ranked among the top remittance recipients in Eastern Europe, with inflows reaching approximately 5-6% of GDP at their peak (World Bank, Net Migration, 2025). However, this share has declined over time, both due to economic growth and the stabilization of migration patterns. More recent estimates place remittances at around 2.5% of GDP, indicating a reduced macroeconomic dependence compared to earlier periods (Idem, Personal Remittances % of GDP, 2024).

At the macroeconomic level, remittances contributed to balance-of-payments support and foreign currency inflows, particularly during the transition period. Empirical analyses suggest that remittances supported domestic demand and alleviated poverty in the 2000s, especially in rural and economically lagging regions (Cismaș et al., 2020, pp. 1091-1092; Maha & Incaltarau, 2012, pp. 75-79). At the household level, remittances were primarily directed toward consumption, housing improvements, and education, with more limited evidence of productive investment (Ibidem). Studies on Romanian migration indicate that remittance use often reinforced local consumption economies, while also contributing to rising real estate prices and regional disparities (Bujor, 2025, pp. 118-119; Vasile, 2021, pp. 40-44).

Over time, however, the relative importance of remittances diminished as Romania’s development trajectory became increasingly anchored in broader structural processes. These include access to EU structural and cohesion funds, growth in foreign direct investment, and integration into European production networks. In this context, migration did not disappear, but became embedded within a wider framework of economic convergence and labor mobility, rather than functioning as a central pillar.

The Romanian state did not initially construct migration as a development strategy, but later development policies aimed at managing its consequences, including diaspora engagement initiatives and selective return migration programs. The success of these policies is still debated, although state attempts at managing the Romanian diaspora are constantly expanding (Borz, 2020, pp. 5-12). As presented in Figure 2, large-scale migration emerged immediately after 1989 in the absence of a dedicated institutional framework, driven primarily by economic restructuring and newly available mobility opportunities. Legal developments that followed, such as the 1991 Constitution, established the right to movement but did not create mechanisms for managing or organizing migration flows. The most significant shift occurred with the accession to the European Union in 2007. This effectively transferred the governance of migration to a supranational framework based on free movement. Romanian emigration started much earlier, even in cases of irregularity, but it was not the main focus of the state. As a result, institutionalization here did not take the form of a state-led system of labor export. Later policies targeting diaspora further reflect a reactive approach, aimed at addressing the consequences of migration, rather than structuring it as an economic strategy.

Migration has had significant social and structural effects, including labor shortages in certain sectors, demographic decline, and the outflow of skilled workers (Iacob (Bâra), 2018, pp. 58-60; Moldovan, 2020, pp. 88-90). These dynamics have been widely documented but do not translate into a singular development model centered on remittances. Instead, they point to the role of migration as one component within a broader transformation of the economy.

This case illustrates a configuration in which migration and remittances are integrated but not constitutive of the development trajectory. While remittances played an important role during the transition period, their declining relative importance and the prominence of alternative growth drivers indicate a different form of interaction between migration and development.

Comparative Analysis - Migration, Remittances, and Development Pathways

The cases of Bangladesh and Romania reveal that similar patterns of large-scale labor migration do not produce uniform development outcomes. Instead, the role of migration and remittances is mediated by institutional configurations, temporal dynamics, and the broader political-economic context in which they are embedded.

Timing and mode of institutionalization

In Bangladesh, migration evolved into a systematically organized process, with the state progressively developing mechanisms to regulate and facilitate labor. Over time, this resulted in a relatively stable configuration in which migration became predictable, recurrent, and policy-supported.

In Romania, migration emerged more spontaneously in the context of post-socialist restructuring, driven by labor market dislocation and income differentials. Institutional engagement followed rather than preceded migration, with policies focusing on managing mobility and its effects.

Therefore, a key point of divergence between Bangladesh and Romania lies in the sequencing and form of institutional engagement with migration. In Bangladesh, large-scale labor migration began in the 1970s and was progressively incorporated into formal state structures through the development of recruitment systems, bilateral labor agreements, and administrative oversight mechanisms. This led to a relatively stable configuration in which migration flows are actively mediated and reproduced through institutional channels. In Romania, mass migration emerged primarily after 1989 as a response to economic restructuring, preceding any coherent policy framework. Institutional engagement developed later and remained oriented toward the regulation of mobility, rather than the active organization of labor export.

This difference in sequencing shapes the extent to which migration becomes structurally embedded within the economy. Institutionalization follows migration in one case and progressively consolidates it in the other case. To better understand the two cases, Table 1 looks into the dimensions related to timing and mode of institutionalization.

As shown in Table 1, the contrast between the two cases is not simply one of policy design, but of sequencing and integration. In Bangladesh, early and continuous institutional involvement contributed to the stabilization and reproduction of migration flows, reinforcing their significance. In Romania, the delayed and regulatory nature of institutional engagement reflects a different dynamic. Migration remains embedded within broader processes of economic transformation rather than consisting of a central organizing mechanism.

The structure of migration flows: temporality and skill composition

The structure of migration flows in Bangladesh and Romania differs along two key dimensions: temporality and skill composition. These shape the continuity and developmental function of remittance flows. In Bangladesh, migration is predominantly temporary and circular, with workers employed on fixed-term contracts, particularly in Gulf countries. This pattern generates recurrent cycles of departure and return, sustaining relatively stable remittance inflows over time. In Romania, migration has evolved toward more permanent and semi-permanent forms, facilitated by free movement within the EU. This enables longer-term settlement, family reunification, and labor market integration in destination countries. At the same time, the skill composition of migration differs: Bangladeshi migration is largely concentrated in low-and semi-skilled sectors. In Romania, migration displays a more diversified profile, including both low-skilled and high-skilled labor. Table 2 presents the main patterns met on these dimensions, to provide a clearer look into the purpose migration serves in each case.

As illustrated in Table 2, differences in temporality and skill composition are directly linked to the function of migration within each case. In Bangladesh, the predominance of temporary and circular migration reinforces continuous ties between migrants and origin households, contributing to stable and recurrent remittance inflows. In Romania, the shift toward more permanent forms of migration, combined with a more diversified skill profile, alters this dynamic. Longer-term settlement and family reunification tend to reduce the frequency and relative importance of remittances over time, while facilitating integration into destination countries.

The function of remittances within each economy

The most significant contrast between Bangladesh and Romania lies in the economic function of remittances. In Bangladesh, remittances constitute a structurally significant source of external finance, contributing consistently to GDP, foreign exchange reserves, and the stabilization of the balance of payments. Their sustained volume and relative stability position them as a central component of economic reproduction. In Romania, remittances reached high levels during the 2000s but have since declined in relative importance, both as a share of GDP and in relation to other financial inflows. While they continue to support household consumption and investment, their macroeconomic role has become more limited over time. This divergence indicates that remittances may function either as a core economic pillar or as a transitional resource, depending on their relative weight, durability, and interaction with other drivers of development. To better illustrate the difference, Table 3 summarizes the data available.

The comparison in Table 3 highlights that the divergence between the two cases is not primarily one of scale, but of function. In Bangladesh, the sustained magnitude and stability of remittance inflows, combined with their role in foreign exchange accumulation, position them as a central component of the economic system. In Romania, although remittances and the growing role of alternative financial inflows indicate a different configuration, remittances operate as a supplementary resource rather than a structural pillar.

In Bangladesh, migration contributes to a form of externally sustained stability in which remittance inflows compensate for structural constraints in domestic production and employment. This creates a configuration in which migration becomes reproductive of the existing economic structure, rather than transformative.

Conclusion

This paper set out to examine how migration and remittances interact with development processes by comparing Bangladesh and Romania. While both cases exhibit significant labor outmigration and periods of remittance-intensive inflows, the analysis demonstrates that these similarities do not translate into equivalent development patterns. Instead, the role of migration varies according to the institutional and structural contexts in which it unfolds.

In Bangladesh, migration has become progressively embedded within the economic system, with remittances contributing to macroeconomic stability and forming a relatively durable component of economic growth. In Romania, migration emerged in the context of post-socialist transformation and was later incorporated into a broader trajectory of EU integration. In this setting, remittances played a significant but time-bound role, gradually declining in relative importance as other drivers became more prominent.

The comparison suggests that the migration-development nexus cannot be understood as a uniform or inherently causal relationship. Rather, it reflects a set of context-dependent configurations, in which migration may assume different functions, ranging from a structurally embedded component to a transitional mechanism, depending on how institutions, state practices, and broader economic transformations mediate it. Taken together, the preceding dimensions indicate that the divergence between Bangladesh and Romania is not reducible to any single factor, but emerges from the interaction between migration structures, institutional frameworks, and the economic function of remittances. These elements do not operate independently. Rather, they reinforce one another to produce distinct configurations of the migration-development nexus. This comparison suggests that the role of migration in development is best understood as a configurational outcome, shaped by the alignment, or lack of, between migration regimes, institutional structures, and economic functions. Rather than constituting a uniform mechanism, the migration-development nexus takes different forms depending on how these dimensions interact over time.