1. 20th EBES Conference – Vienna
The Impact of Remittances on Vulnerability in Urban and Rural Households in Serbia
Marko Vladisavljević
20th EBES Conference – Vienna
29 September 2016
Belgrade, Serbia

2. Introduction At-the-risk-of-poverty rate in Serbia 25.6% (SILK, 2015)
Serbia has a large diaspora, which sends remittances back
citizens living and working abroad, which makes about 4% of the population (Stevanović, 2013)
Remittance flows are significantly larger than total foreign direct investment to developing countries
Serbia annually receives USD $4 billion from remittances, amounting to almost 8.5% of the GDP (FDIs 6.7%)
While FDIs significantly fluctuated over the years the inflow of remittances has remained mostly stable.

3. Introduction – research aims
Very few research deal with the effects of remittances and migration on the socio-economic position of the household in Serbia
Research aims to estimate do remittances have significant influence on vulnerability in receiving households

4. Data Limited micro data sources on migration and remittances in Serbia
Data used in this research
EU- SILC 2012, no other survey collecting remittances data
However, detailed information about the migration and remittances is not available
Nationally representative and with a rich data set on vulnerability

5. Methodology – Vulnerability index
Vulnerability index (VI) is composed of facets of vulnerability
Subjective poverty
Vulnerable households type (single/unemployed parent )
Bad health condition
Bad housing
Bad clothing
Undernourishment
Bad leisure
Maximum = 7 – lower living standard, higher vulnerability
Minimum = 0 – higher living standard, lower vulnerability

6. Methodology – Vulnerability index

7. Remittances and vulnerability
Do remittances lower vulnerability?
No differences in vulnerability between the receiving and non-receiving households
Urban rural differences!

8. Regression analysis VI – Vulnerability index
Remit – does the household receives remittances
X – other characteristics:
Household head (age, gender, marital status, education)
Household (number of children and elderly)

9. Regression analysis Confirms the results of the descriptive statistics
Rural
Urban
Household receives remittances
-0.369***
0.331***
(0.122)
(0.116)
Sample size
2,689
3,812
Confirms the results of the descriptive statistics
In rural areas, households that receive remittances are less vulnerable
In urban areas, households that receive remittances are more vulnerable

10. Regression analysis – Endogeneity issues
Do remittances influence the vulnerability?
Endogeneity issues:
Do remittances influence the vulnerability ili
Does vulnerability influences the remittance receipt?
Instrument variables (IV) approach (CMP; Roodman, 2011)
IV – uncorrelated with the dependant variable (vulnerability index), correlated with the regressor (remittance receipt)

11. Regression analysis - Instrument
Approximation of migration network
Share of Migrants in the municipality
Higher number of migrants from the municipality => better opportunity to migrate and send remittances for the people from that municipality
Correlations
Migrant share / Remittances (+)
Migrant share / Vulnerability (-)
Urban: IV is weak and endogenous => One-stage model
Rural: IV is strong, but endogenous

12. Relaxing the assumption of exogenous instrument
Conley et al. (2012) procedure :
=> The results of the two-stage (IV model) can be reliable if we relax the assumption of exogenous instrument
Estimate the effects of Remittances on Vulnerability
Allowing for the direct link between Migrant share and Vulnerability
(Micevska Scharf and Rahut, 2014; Wang, 2013)

13. IV regression coefficients Rural areas
First stage:
Remittances
Second stage:
Vulnerability
Migrant share
0.040***
(0.007)
-1.955***
(0.215)
Sample size
2,689
If the household is from the municipality with the higher migration share, the higher is the likelihood that they receive remittances
Receiving remittances significantly decreases the vulnerability in rural areas

14. Discussion – rural areas
Migrant share  Remittances (+)
Migrant share  Vulnerability (-)
Remittances  Vulnerability (-)
IV approach indicates the direction of the causal relationship:
Migrant share - +
Vulnerability
Remittances -

15. Discussion – rural areas
Migrant share  Remittances (+)
Migrant share  Vulnerability (-)
Remittances  Vulnerability (-)
IV approach indicates the direction of the causal relationship:
Migrant share increases the likelihood of remittance receipt
Receiving remittances decreases vulnerability in rural areas
We allow for a relationship between Migrant share and Vulnerability
Migrant share - +
Vulnerability
Remittances -

16. Discussion – urban areas
Migrant share  Remittances (+)
Migrant share  Vulnerability (-)
Remittances  Vulnerability (+)
Migrant share - +
Vulnerability
Remittances +

17. Discussion – urban areas
Migrant share  Remittances (+)
Migrant share  Vulnerability (-)
Remittances  Vulnerability (+)
We cannot use IV methods to determine causality
Migrants from the less vulnerable families do not send remittances
Migrants from the vulnerable families send remittances
In spite of remittances they are still more vulnerable
Migrant share - +
Vulnerability
Remittances +

18. Conclusions Remittances serve as informal social protection:
in rural areas, remittances decrease vulnerability,
in urban areas, remittance recipients are worse off than the non-recipients, although receiving money from the abroad.

19. Policy implications
Sudden stop of remittances would have significant negative effects on the receivers
Social protection policy
Paid from the remittances as contributions (similarly to unemployment insurance)
Voluntary or mandatory?
Shield remittance-receivers in case remittances cease, time – depending on the period of contributions paid
Education, so they could realize the importance of this type of insurance

20. Policy implications Labour market policies
Disincentivising effect of the remittances
Encourage recipients to go to engage in the employment programmes (partially financed by the remittances)
Start a micro-business, with a combination of Government funds and remittances (tax exemptions, contribution reductions etc.)
Conduct new surveys, that would deal with remittances and migration in more detail

21. Thank you for your attention
Thank you for your attention