Migration, Remittances, and Labor Supply in Albania Zvezda Dermendzhieva GRIPS December 15, 2010 Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 1 / 15
Outline 1 Motivation 2 Methodology 3 Results 4 Conclusion Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 2 / 15
Outline The effect of migration and remittance receipts on the labor supply of those who stay behind Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 3 / 15
Motivation Migration and Remittances in Albania Migrant Stock as Percentage of the Population and Remittances as Percentage of GDP Workers' Remittances as Share of GDP, Foreign Direct Investment (FDI), and Official Development Assistance (ODA) and Official Aid (OA): Five-year Moving Averages Albania 0.0% 10.0% 20.0% 30.0% 10.00 9.00 Share of GDP Bulgaria 8.00 Share of FDI Croatia Migrant Stock (2005) 7.00 6.00 Share of ODA and OA Macedonia 5.00 Romania Remittances (2006) 4.00 3.00 Serbia & Montenegro 2.00 Turkey 1.00 0.00 Ukraine 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: World Bank Migration and Remittances Factbook 2008 Source : The World Bank World Development Indicators 2008 Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 4 / 15
Motivation Remittances and Labor Supply Remittances and labor supply around the world Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 5 / 15
Motivation Remittances and Labor Supply Remittances and labor supply around the world Azam and Gubert (2006) Mali Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 5 / 15
Motivation Remittances and Labor Supply Remittances and labor supply around the world Azam and Gubert (2006) Mali Yang (2006) the Philippines Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 5 / 15
Motivation Remittances and Labor Supply Remittances and labor supply around the world Azam and Gubert (2006) Mali Yang (2006) the Philippines Chen (2006) China Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 5 / 15
Motivation Remittances and Labor Supply Remittances and labor supply around the world Azam and Gubert (2006) Mali Yang (2006) the Philippines Chen (2006) China Amuedo-Dorantes and Pozo (2006) Mexico Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 5 / 15
Motivation Remittances and Labor Supply Remittances and labor supply around the world Azam and Gubert (2006) Mali Yang (2006) the Philippines Chen (2006) China Amuedo-Dorantes and Pozo (2006) Mexico Chami et. al. (2005) Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 5 / 15
Motivation Remittances and Labor Supply Remittances and labor supply around the world Azam and Gubert (2006) Mali Yang (2006) the Philippines Chen (2006) China Amuedo-Dorantes and Pozo (2006) Mexico Chami et. al. (2005) Remittances and labor supply in Albania Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 5 / 15
Motivation Remittances and Labor Supply Remittances and labor supply around the world Azam and Gubert (2006) Mali Yang (2006) the Philippines Chen (2006) China Amuedo-Dorantes and Pozo (2006) Mexico Chami et. al. (2005) Remittances and labor supply in Albania Palomba and Vodopivec (2001) Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 5 / 15
Motivation Remittances and Labor Supply Remittances and labor supply around the world Azam and Gubert (2006) Mali Yang (2006) the Philippines Chen (2006) China Amuedo-Dorantes and Pozo (2006) Mexico Chami et. al. (2005) Remittances and labor supply in Albania Palomba and Vodopivec (2001) Konica and Filer (2009) Own survey in 1996 negative effect of remittances on labor supply for females and positive effect of having a returned migrant in the household for being employed in a household business Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 5 / 15
Motivation Remittances and Labor Supply Remittances and labor supply around the world Azam and Gubert (2006) Mali Yang (2006) the Philippines Chen (2006) China Amuedo-Dorantes and Pozo (2006) Mexico Chami et. al. (2005) Remittances and labor supply in Albania Palomba and Vodopivec (2001) Konica and Filer (2009) Own survey in 1996 negative effect of remittances on labor supply for females and positive effect of having a returned migrant in the household for being employed in a household business Newer data Albania 2005 LSMS Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 5 / 15
Motivation Percentage of Adult Household Members Working by Migration and Remittance Income Status Household Receives Remittances 0 1 0 51.2% 49.6% Household Has Migrants 1 44.5% 32.4% Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 6 / 15
Methodology The Effect of Migration and Remittances on Labor Supply Y i = a 0 + a 1 M i + a 2 R i + a 3 X i + ε i Y i = 1[Y > 0] ε i Normal(0, σ 2 ) for i=1,2,3,..., n individuals Y binary dependent variable denoting working status M binary variable for current migrant(s) R binary variable for remittance income X vector of exogenous individual and household characteristics (age, education, type of residence, young children, other non-labor income) and regional unemployment rate Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 7 / 15
Methodology The Effect of Migration and Remittances on Labor Supply Endogeneity of migration and remittances need an IV Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 8 / 15
Methodology The Effect of Migration and Remittances on Labor Supply Endogeneity of migration and remittances need an IV Sample selection bias due to selection into migrant status analysis for subsamples of those who are least likely to migrate Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 8 / 15
Methodology The Effect of Migration and Remittances on Labor Supply Endogeneity of migration and remittances need an IV Sample selection bias due to selection into migrant status analysis for subsamples of those who are least likely to migrate Measurement error (Korovilas, 1999) dichotomous variable for remittance receipts Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 8 / 15
Methodology The Effect of Migration and Remittances on Labor Supply Endogeneity of migration and remittances need an IV Sample selection bias due to selection into migrant status analysis for subsamples of those who are least likely to migrate Measurement error (Korovilas, 1999) dichotomous variable for remittance receipts Linear Probability Model Angrist (2001); Heckman and MaCurdy (1985); Caudill (1988) Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 8 / 15
Methodology Instrumenting for Migration and Remittances Instruments for migration in Albania Kilic et al., 2009; McCarthy et. al., 2006 language abilities of the household members in 1990 migrant network in 1990 distance from major exit points for emigrants satellite dish ownership in 1990 number of shocks experienced by the household until the first emigration episode male-to-female ratio for the population aged 20-39 within a district Instrument for remittances in Mexico Amuedo-Dorantes and Pozo, 2006 number of Western Union agents per capita within a state interactions with the percentage of household members with secondary and with higher education Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in Albania December 15, 2010 9 / 15
Results Relevance of the Instruments Test All Females Married Females All Males Males Aged 46-60 F-tests for joint significance Migrants F(5,3116)=28.56 F(5,2856)=26.64 F(5,2931)=26.89 F(5,1262)=19.11 Prob>F=0.000 Prob>F=0.000 Prob>F=0.000 Prob>F=0.000 Remittances F(5,3116)=12.74 F(5,2856)=10.28 F(5,2931)=9.00 F(5,1262)=6.92 Prob>F=0.000 Prob>F=0.000 Prob>F=0.000 Prob>F=0.000 F-tests for correct exclusion Migrants F(1,3117)=1.06 F(1,2857)=0.00 F(1,2932)=4.69 F(1,1263)=1.55 Prob>F=0.303 Prob>F=0.964 Prob>F=0.031 Prob>F=0.213 Remittances F(1,3116)=3.82 F(1,2856)=1.61 F(1,2931)=9.67 F(1,1262)=3.32 Prob>F=0.051 Prob>F=0.205 Prob>F=0.002 Prob>F=0.069 Hansen-Sargan Test 4.421 2.050 0.002 0.069 Chi-sq(3) P-value 0.220 0.562 0.001 0.338 Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in AlbaniaDecember 15, 2010 10 / 15
Results Labor Supply of Albanian Females Aged 15-55 All Females Married Females OLS 2SLS OLS 2SLS Migrants -0.01 0.23-0.02 0.64 Remittances 0.03-0.64 0.03-1.03* Age 0.05*** 0.05*** 0.05*** 0.06*** Age squared/100-0.06*** -0.06*** -0.06*** -0.08** Secondary Education 0.07*** 0.06*** 0.11*** 0.12*** Tertiary Education 0.46*** 0.44*** 0.47*** 0.49*** Urban Residence -0.29*** -0.31*** -0.29*** -0.31*** Tirana Residence -0.32*** -0.26*** -0.33*** -0.25*** Child Aged 0-6 -0.07*** -0.10*** -0.10*** -0.12*** Non-labor Income (Euro)/100 0.00 0.00-0.01-0.01 Regional Unempl. Rate/100-0.33*** -0.23** -0.28* -0.46 N 4717 3032 Notes: ***,**,* Denote statistical significance at the 0.01, 0.05, and 0.10 level, respectively. Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in AlbaniaDecember 15, 2010 11 / 15
Results Labor Supply of Albanian Males Males Aged 15-60 Males Aged 46-60 OLS 2SLS OLS 2SLS Migrants -0.01 0.00 0.01 0.55** Remittances -0.04** 0.10-0.05* -0.81** Age 0.08*** 0.08*** 0.04-0.01 Age squared/100-0.09*** -0.10*** -0.05-0.01 Secondary Education 0.04** 0.04** 0.06** 0.05 Tertiary Education 0.18*** 0.19*** 0.17*** 0.09 Urban Residence -0.18*** -0.17*** -0.15*** -0.16*** Tirana Residence -0.13*** -0.13*** -0.15*** -0.09 Child Aged 0-6 -0.02 0.03* -0.08* -0.09 Non-labor Income (Euro)/100-0.07*** -0.07*** -0.09*** -0.08** Regional Unempl. Rate/100-0.16** -0.26-0.17 0.26 N 4367 1264 Notes: ***,**,* Denote statistical significance at the 0.01, 0.05, and 0.10 level, respectively. Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in AlbaniaDecember 15, 2010 12 / 15
Results Combined Effects of Migration and Remittances All Females Migrants Remittances 0 1 0 0.03 1 0.01 0.02 OLS Migrants Remittances 0 1 0 0.64 1 0.23 0.42 2SLS Married Females Migrants Remittances 0 1 0 0.03 1 0.02 0.01 OLS Migrants Remittances 0 1 0 1.03 1 0.64 0.39 2SLS Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in AlbaniaDecember 15, 2010 13 / 15
Results Combined Effects of Migration and Remittances All Males Migrants Remittances 0 1 0 0.04 1 0.01 0.05 OLS Migrants Remittances 0 1 0 0.10 1 0.00 0.10 2SLS Males Aged 46-60 Migrants Remittances 0 1 0 0.05 1 0.01 0.05 OLS Migrants Remittances 0 1 0 0.81 1 0.55 0.26 2SLS Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in AlbaniaDecember 15, 2010 14 / 15
Conclusion Conclusion Earlier finding of a strong negative effect of remittances on labor supply of females not confirmed by recent data Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in AlbaniaDecember 15, 2010 15 / 15
Conclusion Conclusion Earlier finding of a strong negative effect of remittances on labor supply of females not confirmed by recent data Positive effect of having a migrant household member and negative effect of receiving remittances on labor supply of older males Zvezda Dermendzhieva (GRIPS) Migration, Remittances, and Labor Supply in AlbaniaDecember 15, 2010 15 / 15