Remittances’ impact on the labor supply and on the deficit of current account

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Remittances, a significant benefit of international migration, greatly impact the countries of origin, making migration a key focus for researchers. These financial flows serve as a major source of private external finance for many developing countries, often exceeding official aid or foreign direct investment. However, a notable drawback is the loss of skilled young workers, resulting in children being raised by grandparents and leading to economic and social costs. The absence of young adults affects both the economy and society. Despite this, the potential benefits drive individuals to migrate, as their families and home countries can gain from the remittances. The free movement of labor creates opportunities in developing economies and generates foreign currency revenue. Developed nations benefit from a more flexible labor supply. Remittances can boost consumption, enhance investments, and significantly contribute to economic growth in recipient countries. They are generally less volatile than other financial flows and often represent a substantial portion of GDP and balance of payments. This paper investigates the role of remittances in financing the balance of payment deficit, documenting their increasing share in Albania and Southeast Europe, analyzing their benefits and costs, and highlighting their positive impact on the current account balance and the reduction of Albanian National Debt.