Migration, remittances, and labor supply in Albania

Type Working Paper
Title Migration, remittances, and labor supply in Albania
Publication (Day/Month/Year) 2010
URL http://wbox.cerge-ei.cz/pdf/gdn/RRCVIII_60_paper_01.pdf
This paper investigates the effect of international migration and remittances on labor supply in Albania. It attempts to deal with the potential endogeneity problems inherent in this type of analysis by instrumenting for the household migration decision and remittance receipts. When an instrumental variable approach is used, the predicted effects of migration and remittances on labor supply appear significant only for the males between the age of 46 and 60. The expected negative impact on unemployment, due to an income effect of remittances, among the female population in Albania, is not confirmed by the data. After instrumenting, for the females and for the older males, I obtain large and positive coefficients for having a migrant and large and negative coefficients for receiving remittances. Despite the insignificant at conventional levels effects for the female subsamples, the magnitudes and the signs of all estimated coefficients suggest that the OLS estimates of the effect of migration are likely biased downwards, while the OLS estimates for the effect of remittances are biased upwards, compared to the true effects of these variables.

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