Migration, remittances and inactivity in the Western Balkans Marjan Petreski University American College Skopje

Economic effects of emigration and remittances Positive Alleviate poverty Improve some education and health indicators Support small-scale investment Negative May spur labor-market inactivity (?) Brain-drain

Previous studies findings Remittances reduce poverty (Petreski et al. 2013; Petreski and Petreski, 2016) By 3 p.p. in Macedonia (similarly as the work of the social financial assistance) In BH, Albania and Kosovo, probability of falling into poverty significantly reduced for receiving households; In Serbia, remittances improve poverty condition for the rural households, while in urban areas, poor households are more prone to send migrants; Results have been mixed for inequality Remittances reduce inequality in Macedonia and Kosovo They increase it in Bosnia (do not potentially flow to the poorest households?) Results are also mixed for the effect on non-income vulnerability indicators (health, education, leisure etc.)

Previous studies findings (2) Remittances barely meaningful for small-scale investment Only the richest remittance-receivers invested some of the received money in Macedonia (Petreski et al. 2013) Remittances spur inactivity, but not for youth (Petreski and Mojsoska-Blazevski, 2014) Kosovars do not invest the money Remittances reduce the probability that one would invest this money in Bosnia

Migration and inactivity: Theoretical foundations Individuals allocate time to market work and non-market activities maximizing utility subject to a budget constraint Budget constraint: individual market wage individual’s non-labor income Reservation wage Non-labor income is a major determinant of the reservation wage function of: own assets and the amount of income of other household members One can think of remittances as an increase in non-labor income that would lead to a reduction in labor force participation of recipient household members. “discouraged participation”

(left: all; right: females) Some correlations (left: all; right: females)

Remittances and inactivity: previous findings Abazi et al. (2012): Remittances are positively affecting female participation in Albania; How is this money spent? Building social network abroad -> increase participation negatively in Macedonia; More pronounced role of women as housewives and carers no relation in Kosovo Mojsoska-Blazevski et al. (2017): Remittances are insignificant for female labor-force participation

Recent expert-opinion consensus Divergent results about remittances’ labor-market effect (consensus hardly achieved): Macedonia: experts - remittances will support inactivity; receivers – employment Serbia: both groups agreed remittances will support activity, albeit experts – employment, while receivers – self-employment; Albania and Kosovo: remittances will support activity.

Comment welcome. marjan.petreski@uacs.edu.mk