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PLEASE SCROLL DOWN FOR ARTICLE This article was downloaded by: [Hoti, Avdullah] On: 17 December 2009 Access details: Access Details: [subscription number 917919433] Publisher Routledge Informa Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37- 41 Mortimer Street, London W1T 3JH, UK Southeast European and Black Sea Studies Publication details, including instructions for authors and subscription information: http://www.informaworld.com/smpp/title~content=t713634533 Determinants of emigration and its economic consequences: evidence from Kosova Avdullah Hoti a a Faculty of Economy, University of Prishtina, Prishtina, Kosova Online publication date: 17 December 2009 To cite this Article Hoti, Avdullah(2009) 'Determinants of emigration and its economic consequences: evidence from Kosova', Southeast European and Black Sea Studies, 9: 4, 435 — 458 To link to this Article: DOI: 10.1080/14683850903314931 URL: http://dx.doi.org/10.1080/14683850903314931 Full terms and conditions of use: http://www.informaworld.com/terms-and-conditions-of-access.pdf This article may be used for research, teaching and private study purposes. Any substantial or systematic reproduction, re-distribution, re-selling, loan or sub-licensing, systematic supply or distribution in any form to anyone is expressly forbidden. The publisher does not give any warranty express or implied or make any representation that the contents will be complete or accurate or up to date. The accuracy of any instructions, formulae and drug doses should be independently verified with primary sources. The publisher shall not be liable for any loss, actions, claims, proceedings, demand or costs or damages whatsoever or howsoever caused arising directly or indirectly in connection with or arising out of the use of this material.

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Page 1: Southeast European and Black Sea ... - ekonomiks.weebly.comekonomiks.weebly.com/uploads/5/5/1/5/5515573/hoti... · Determinants of emigration and its economic consequences: evidence

PLEASE SCROLL DOWN FOR ARTICLE

This article was downloaded by: [Hoti, Avdullah]On: 17 December 2009Access details: Access Details: [subscription number 917919433]Publisher RoutledgeInforma Ltd Registered in England and Wales Registered Number: 1072954 Registered office: Mortimer House, 37-41 Mortimer Street, London W1T 3JH, UK

Southeast European and Black Sea StudiesPublication details, including instructions for authors and subscription information:http://www.informaworld.com/smpp/title~content=t713634533

Determinants of emigration and its economic consequences: evidence fromKosovaAvdullah Hoti a

a Faculty of Economy, University of Prishtina, Prishtina, Kosova

Online publication date: 17 December 2009

To cite this Article Hoti, Avdullah(2009) 'Determinants of emigration and its economic consequences: evidence fromKosova', Southeast European and Black Sea Studies, 9: 4, 435 — 458To link to this Article: DOI: 10.1080/14683850903314931URL: http://dx.doi.org/10.1080/14683850903314931

Full terms and conditions of use: http://www.informaworld.com/terms-and-conditions-of-access.pdf

This article may be used for research, teaching and private study purposes. Any substantial orsystematic reproduction, re-distribution, re-selling, loan or sub-licensing, systematic supply ordistribution in any form to anyone is expressly forbidden.

The publisher does not give any warranty express or implied or make any representation that the contentswill be complete or accurate or up to date. The accuracy of any instructions, formulae and drug dosesshould be independently verified with primary sources. The publisher shall not be liable for any loss,actions, claims, proceedings, demand or costs or damages whatsoever or howsoever caused arising directlyor indirectly in connection with or arising out of the use of this material.

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Southeast European and Black Sea StudiesVol. 9, No. 4, December 2009, 435–458

ISSN 1468-3857 print/ISSN 1743-9639 online© 2009 Taylor & FrancisDOI: 10.1080/14683850903314931http://www.informaworld.com

Determinants of emigration and its economic consequences: evidence from Kosova

Avdullah Hoti*

Faculty of Economy, University of Prishtina, Prishtina, KosovaTaylor and FrancisFBSS_A_431667.sgm (Received 28 October 2008; final version received 17 March 2009)10.1080/14683850903314931Southeast European and Black Sea Studies1468-3857 (print)/1743-9639 (online)Original Article2009Taylor & [email protected]

This paper concentrates on the determinants of emigration decisions among theworking-age population in Kosova, a country with 20% of its population abroad.The estimates derived are largely consistent with the conventional theories ofmigration in that emigration decreases with age and generally increases witheducation and household size, though significant differences are also noted. Inaddition, the paper focuses on the brain drain effect due to emigration andemployment differentials at home and abroad as the driving force for emigrationfrom Kosova. This is the first systematic study of these issues in this post-socialistand post-conflict economy.

Keywords: emigration; brain drain; labour force; Kosova

Introduction

Labour movements from one country to another change the economic prospects ofboth the destination and origin countries. From an individual point of view, emigra-tion is an income-maximising strategy, while in macroeconomic terms emigrationreduces the size of the domestic labour force and changes its skills composition,affects aggregate spending due to remittances and produces other second- and third-order effects. The political crisis in Kosova following the dismantling of socialistYugoslavia resulted in 145,000 workers being laid-off at once (Riinvest Institute2003), which was unseen elsewhere in transition economies. This, coupled with thelack of jobs and widespread political unrest, contributed to large-scale emigration. Inspite of the economic upturn brought by the economic reconstruction after 1999 andlarge inflows of foreign aid, unemployment remains above 40% due to the largenumber of new entrants to the labour market coupled with low job creation in theprivate sector. Therefore, from an individual point of view, emigration may be seenas a strategy of escaping unemployment and contributing towards householdincomes.

This paper explores how personal, household and other contextual characteristicsshape the emigration decisions in Kosova. The analysis is based on the RiinvestHousehold and Labour Force Survey of 2002 (HLFS 2002) data and other existingdata and estimates on emigration and remittances in Kosova. The data from theRiinvest HLFS with regard to emigration and remittances are far from perfect, for

*Email: [email protected]

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436 A. Hoti

reasons that will be discussed later, but this is the first analysis of emigration andremittances in Kosova.

The paper is organised as follows. The next section presents a brief review of theorthodox economic analysis of migration and empirical evidence. This is followed byan examination of the potential brain drain and brain gain consequences of emigrationand the effect of remittances on the local economy. Numerical estimates of emigrantsfrom Kosova and their remittances are discussed in the following section, and usingthe Riinvest HLFS data, the profile of emigrants and the brain drain issue is examined.In the subsequent section, the paper presents a set of determinants of emigration deci-sions in Kosova and puts forward an estimate of employment possibilities at home andabroad as the driving force for emigration in the case of Kosova. The final sectionincludes the concluding remarks.

The economic basis of migration and empirical evidence

The World Bank (2006) estimates that in 2002 international migrants represented 3%of the destination countries’ population worldwide, while for the developed countriesthis was 8%. These figures represent net migration, with gross migration certainlybeing larger due to temporary and returning migration. In the European TransitionCountries (ETCs), prior to 1990 both international and internal migration were verylimited (León-Ledesma and Piracha 2004; Mansoor and Quillin 2007). Typically,there had been rural-to-urban migration from the 1950s. The movement of workerstowards industrial centres was the dominant form of migration, while the limitedinternational migration was contained within ETCs (Kaczmarczyk and Okólski2005).

With the collapse of the socialist regimes, migration intensity increased sharplyand included both permanent and temporary migration, mostly towards the EU-15(Mansoor and Quillin 2007). A number of ETCs experienced true mass migrationwaves (notably Albania), while in some others migration was unexpectedly moderate(most of the Central European countries) given their proximity to the EU and theremoval of many legal barriers to migration.

The unemployment rate reached double digits in many ETCs and stayed highthroughout the 1990s. However, the efficacy of migration in reducing national andregional unemployment differentials has generally been low and migration flowsdeclined through the 1990s, even though inter-regional disparities during this decadewere rising (Fidrmuc 2004). Some of these countries became net immigration areasby 2002–2003 (Salt 2005).1

The orthodox economics of migration attempts to answer two key questions:Why does labour migrate? And what are the consequences of such decisions? Thediscussion below tackles the first question, while in the following section we dealwith the second question. In general, migration theories are rooted in theories ofeconomic growth where labour mobility from one (low productive) sector to another(more productive) sector is seen as an instrument that promotes economic welfareand therefore is socially desirable (Ghatak, Levine, and Price 1996). Labour movesto take advantage of wage and employment differentials between locations (Harrisand Todaro 1970). Workers choose the location that maximises the expected netpresent value of lifetime earnings, net of the costs of a move. Following Hatton andWilliamson (2002), the decision of individual i in source country h to migrate todestination country f can be expressed as:

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Southeast European and Black Sea Studies 437

where wfi and whi are the expected earnings of the individual in the destination andthe source country respectively, zi is the individual’s compensating differential infavour of h and c is the direct cost of migration. Thus, the theory predicts that the like-lihood of migration increases with the wage in the destination country, while itdecreases with the wage in the home country, compensating differentials in favour ofh and migration costs. The likelihood of migration declines with age, since for olderworkers the remaining working life is shorter. In the Harris and Todaro framework,wfi and whi are weighted by the probability of securing employment abroad (pfi) and athome (phi) respectively.

In the human capital framework, the wage abroad (wf) and that at home (wh)depend, inter alia, on the individual’s skill level (si) as indicated by Equations (2) and(3), where βf and βh are the rates of return to skills abroad and at home respectively:

Substituting them into Equation (1) we get:

which suggests that migrants are unlikely to be randomly selected from the popula-tion, with the nature of selection bias being determined by the relative returns to skills.Thus, migration will increase with skill level (i.e. migrants will be positively selected)if returns to skills are higher in the destination country compared to the source country(βf >βh) and vice versa. Note that with migration, we refer to international migration.However, most of the discussion in this paper applies to internal (inter-regional)migration as well.

This analysis is based on Roy’s (1951) model, which predicts that under certainassumptions (such as similar political conditions) the relative payoff to skills acrosscountries determines the skill composition of migrants. Under both positive and nega-tive selection of migrants, the assumption is that skills are sufficiently transferable toallow migrants to easily integrate at the same occupational and skill level of the labourmarket in the destination country. Self-selection of migrants may also occur due tomigration policies in the destination country (e.g. quotas restricting the number ofmigrants or selecting immigrants only if they have certain skills).

Given that migration is costly, easing financial constraints is expected to inducemore migration. The likelihood of migration increases with the stock of previousmigrants who are living in the destination country by affecting the destination-specificutility, reducing the costs of the move and the uncertainty associated with migration(Bauer, Epstein, and Gang 2000). This is referred to as the ‘network’ or ‘friends andrelatives’ effects of migration.

The so-called ‘new economics of migration’ emphasises the role of the house-hold in the decision to migrate (Funkhouser 1995; Mincer 1978; Rapoport andDocquier 2005; Rodriguez and Tiongson 2001; Stark 1991). Migration of a house-hold member is likely to have implications for the entire household and this theorysuggests that migration takes place due to the household allocating its labour force

d w w z ci fi hi i= − − − >0 1( )

w sfi f f i= +α β ( )2

w shi h h i= +α β ( )3

d s z ci f h f h i i= − + − − −α α β β( ) ( )4

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438 A. Hoti

so as to reduce (or diversify) the risk to its incomes as predicted by portfolio invest-ment theory. Incomes from migrant members abroad ensure a smoothing of house-hold consumption over time. Thus, the migration decision is not driven bymaximising an individual’s lifetime earnings, but by whether the household as awhole is better off.

A summary of empirical evidence on determinants of migration is presented inTable 1. There is limited evidence for transition economies, therefore we show someevidence for other countries as well. In line with the theoretical predictions, most stud-ies find that young people tend to migrate more than older people. Migration is foundto increase with education, pointing to the positive selection of migrants. A number ofstudies find that migrants do not predominantly come from the poor households,suggesting that easing financial constraints increases migration. As expected, migra-tion is found to increase with migration networks.

The macroeconomic evidence is largely in line with that presented above. Mayda(2005), investigating bilateral migrant flows in 14 OECD countries, finds that a coun-try’s emigration rate increases with its share of young population. Adams and Page(2003) find for 74 developing countries that a country’s emigration rate decreaseswith its distance to a major labour-receiving region (USA and European OECD coun-tries). They find an inverted U-shaped curve regarding the effect of a country’s percapita income on its emigration rate. Rotte and Vogler (1998) also find evidence ofthe importance of the political situation in the sending countries and of networkeffects.

The economic consequences of emigration

For the origin country, the emigration of parts of its labour force has two main impli-cations. First, emigration changes the size and may also change the skill compositionof the labour force. Second, emigration, through remittances, affects aggregate spend-ing and investment in the local economy, the labour market behaviour of non-migranthousehold members and produces other knock-on effects in the economy.

Brain drain and brain gain consequences of migration

When a country experiences the emigration of highly skilled workers, then it faces a‘brain drain’, an issue that has generated wide-ranging debates among both academicsand policy-makers. Adams (2003), analysing 24 labour exporting countries, finds thatemigrants disproportionately represent the elite of the population, though in mostcountries it does not involve more than 10% of the population with higher education.From the limited evidence from transition economies, Gedeshi (2006) reports thateach year during 1991–2000, 8–10% of lecturers and research workers at the univer-sities and research institutions in Albania emigrated. This trend decreased after 2000and in 2005, it was about 2%.

Conventional wisdom has seen the emigration of skilled workers as damaging thecountry of emigration. It affects the income level and long-run economic growth andmakes the country less attractive to foreign direct investment. Emigration of highlyskilled workers increases the fiscal burden of those left behind, because the former aretypically net contributors to the government budget. Skilled and unskilled workers arefrequently complements in the production process and emigration of the former maydecrease the productivity of the latter (Docquier and Rapoport 2004).

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Southeast European and Black Sea Studies 439

Tabl

e 1.

A s

umm

ary

of e

mpi

rica

l fi

ndin

gs o

n de

term

inan

ts o

f m

igra

tion

dec

isio

ns.

Aut

hor(

s) a

nd c

ount

ryE

xplo

res

Exp

lana

tory

var

iabl

esM

ain

find

ings

a

Ger

ber

(200

5), R

ussi

aD

eter

min

ants

of

inte

rnal

m

igra

tion

198

5–20

01In

divi

dual

and

con

text

ual

char

acte

rist

ics

•Y

oung

er, m

arri

ed, m

ore

educ

ated

and

une

mpl

oyed

are

mor

e li

kely

to

mig

rate

•R

ural

res

iden

ts a

re l

ess

mob

ile

than

urb

an r

esid

ents

Ger

men

ji a

nd S

win

nen

(200

5), A

lban

iaD

eter

min

ants

of

bein

g an

em

igra

ntIn

divi

dual

, hou

seho

ld a

nd

cont

extu

al c

hara

cter

isti

cs•

You

nger

, mal

e, m

ore

educ

ated

and

sin

gle

indi

vidu

als

are

mor

e li

kely

to

emig

rate

•E

mig

rant

s ar

e no

t li

kely

to

com

e fr

om p

oor

hous

ehol

ds•

Pos

itiv

e ef

fect

of

mig

rati

on n

etw

orks

Kon

ica

and

Fil

er (

2005

),

Alb

ania

Det

erm

inan

ts o

f be

ing

an e

mig

rant

Indi

vidu

al, h

ouse

hold

and

co

ntex

tual

cha

ract

eris

tics

•E

mig

rati

on in

crea

ses

wit

h ag

e (b

ut a

t a d

ecre

asin

g ra

te) a

nd w

ith

hous

ehol

d si

ze•

Em

igra

tion

dec

reas

es w

ith

hous

ehol

d in

com

e•

Mal

es t

end

to e

mig

rate

mor

e•

Bei

ng m

arri

ed h

as n

egat

ive

(pos

itiv

e) e

ffec

t on

em

igra

tion

of

mal

es (

fem

ales

)E

pste

in a

nd G

ang

(200

4),

Hun

gary

Wil

ling

ness

to

emig

rate

in

199

3–19

94H

ouse

hold

cha

ract

eris

tics

, m

igra

tion

net

wor

ks a

nd

cost

s of

mig

rati

on

•Y

oung

er a

nd m

ore

educ

ated

peo

ple

are

wil

ling

to e

mig

rate

mor

e•

Pos

itiv

e ef

fect

of

mig

rati

on n

etw

orks

•N

egat

ive

effe

ct o

f co

sts

of m

igra

tion

Bas

ker

(200

3), U

SA

Mig

rati

on o

f w

orke

rsIn

divi

dual

cha

ract

eris

tics

•M

igra

tion

inc

reas

es w

ith

educ

atio

nD

rink

wat

er (

2003

), 1

0 E

TC

cou

ntri

esW

illi

ngne

ss t

o em

igra

te

from

ET

Cs

to E

UIn

divi

dual

and

con

text

ual

char

acte

rist

ics

•T

he m

ore

educ

ated

per

sons

and

tho

se s

peak

ing

a fo

reig

n la

ngua

ge a

re m

ore

wil

ling

to

emig

rate

•In

crea

se i

n a

coun

try’

s G

DP

per

cap

ita

redu

ces

the

wil

ling

ness

to

em

igra

teK

enna

n an

d W

alke

r (2

003)

, US

AT

he r

ole

of e

xpec

ted

inco

me

on m

igra

tion

de

cisi

ons

(197

9–19

92)

Indi

vidu

al a

nd c

onte

xtua

l ch

arac

teri

stic

s•

Pos

itiv

e ef

fect

of i

ncom

e di

ffer

enti

als

on in

ters

tate

mig

rati

on fo

r hi

gh-s

choo

l-ed

ucat

ed w

hite

men

Pap

apan

agos

and

San

fey

(200

1), A

lban

iaP

rofi

le o

f po

tent

ial

emig

rant

sP

erso

nal,

hous

ehol

d an

d co

ntex

tual

cha

ract

eris

tics

•M

ales

and

mor

e ed

ucat

ed a

nd t

hose

wit

h ce

rtai

n oc

cupa

tion

s te

nd t

o em

igra

te m

ore

•In

tent

ion

to e

mig

rate

dec

reas

es w

ith

age

•N

o si

gnif

ican

t ef

fect

of

hous

ehol

d in

com

e

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440 A. Hoti

Tabl

e 1.

(Con

tinu

ed)

Aut

hor(

s) a

nd c

ount

ryE

xplo

res

Exp

lana

tory

var

iabl

esM

ain

find

ings

a

Bau

er, E

pste

in, a

nd G

ang

(200

0), M

exic

oT

he e

ffec

t of

mig

rati

on

netw

orks

on

mig

rant

s’

loca

tion

cho

ice

Une

mpl

oym

ent r

ate,

mig

rati

on

netw

ork

and

cost

s of

m

igra

tion

•P

osit

ive

effe

cts

of m

igra

tion

net

wor

ks. B

ut, a

s th

e sh

are

of t

he

mig

rant

pop

ulat

ion

at a

cer

tain

loc

atio

n is

too

lar

ge, t

hen

ther

e ar

e ne

gati

ve s

ize

effe

cts

Fun

khou

ser

(199

2),

Nic

arag

uaD

eter

min

ants

of

bein

g an

em

igra

ntP

erso

nal

and

hous

ehol

d ch

arac

teri

stic

s•

Em

igra

tion

inc

reas

es w

ith

age,

edu

cati

on, h

ouse

hold

inc

omes

an

d ho

useh

old

size

•M

ales

are

mor

e li

kely

to

emig

rate

a All

the

se fi

ndin

gs a

re s

tati

stic

ally

sig

nifi

cant

unl

ess

othe

rwis

e is

sta

ted.

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Southeast European and Black Sea Studies 441

Recently, a new ‘brain drain – brain gain’ literature has emerged (Stark 2004;Stark, Helmenstein, and Prskawetz 1998; Vidal 1998) that contradicts this view on thegrounds that emigration of skilled workers leads to more investment in human capitalby the remaining non-migrant workers, with a resultant net brain gain. The argumentgoes that an economy open to emigration provides workers with more opportunities,relative to when the economy is closed. On the other hand, Schiff (2005) contends thatthis new ‘brain drain – brain gain’ literature does not consider various negative effectsof the brain drain on human capital, welfare and growth.

A topic related to this issue – one that is neglected in the literature – is returnmigration and its effect on the skills of the workforce in the country of origin. This isimportant from the perspective of transition economies where migration is frequentlyof a seasonal nature or for a short period only, where the returned migrants bring backthe experience gained abroad that is diffused in the local economy. For 11 ETCs,León-Ledesma and Piracha (2004) find that returned migrants have had a significantpositive impact on aggregate labour productivity, suggesting that temporary migrationhas contributed to acquiring new skills. Co, Yun, and Gang (1998) estimate earningsequations for men in Hungary and find a wage premium for those who have beenabroad, again suggesting that emigration has contributed to enhancing their humancapital. Likewise, de Coulon and Piracha (2005) find for returned migrants in Albaniathat the benefits of migration translate into access to better jobs.

Remittances and their economic impacts

For many transition and developing economies, remittances (defined as the moneyand goods that emigrants send to their households residing in the country of origin)are the second largest source of external finance after foreign direct investments(Mansoor and Quillin 2007; Ratha 2004; World Bank 2006). Worldwide, the WorldBank (2006) estimates that international remittances rose from US$87 billion in 2000to US$167 billion in 2005; including unrecorded transfers, the total is likely to bemuch higher. Based on the World Bank Indicators database, in 2004 internationalremittances received by 24 transition economies were estimated at US$18.9 billion(Table 2).

The macroeconomic impact of remittances depends partly on whether they areused for consumption or investment purposes. If they are used for investment thenthey are expected to shift the ‘production frontier’ of the receiving countries. Never-theless, as Adams (2005) argues, even if remittances are used for consumption, theymay free other sources of finance that can be used for investment. The increasedconsumption due to remittances is in itself productive for the economy, because it hasimportant multiplier effects on wages, employment and business opportunities.

For 11 ETCs for 1990–1999, León-Ledesma and Piracha (2004) find a positiveeffect of remittances on aggregate output through financing investment and entrepre-neurial activities. Catrinescu et al. (2006) contend that remittances have also producednegative effects through appreciating the real exchange rate that affects the tradingsector. Since remittances enable the economy to spend more than it produces, theymight encourage ‘Dutch Disease’ and more migration. This increases the dependencyof the economy on these financial flows.

Remittances affect the labour supply of non-migrant household members throughtwo different channels. First, based on the neoclassical model of labour–leisurechoice, remittances shift the budget line upwards, increase the reservation wage and

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442 A. Hoti

Tabl

e 2.

Inte

rnat

iona

l re

mit

tanc

es i

n tr

ansi

tion

eco

nom

ies

in m

illi

on o

f U

S$

(200

0–20

04).

Rem

itta

nces

in

mil

lion

of

US

$

2000

2001

2002

2003

2004

Rem

itta

nces

/GD

Pb i

n 20

04

Cou

ntri

esa

[1]

[2]

[3]

[4]

[5]

[6]

Mol

dova

179

243

323

486

703

0.27

1B

osni

a &

Her

zego

vina

1,59

51,

521

1,52

61,

745

1,82

40.

214

Ser

bia

& M

onte

negr

o1,

132

1,69

82,

089

2,66

14,

129

0.17

2T

ajik

ista

nn.

a.n.

a.79

146

252

0.12

2A

lban

ia59

869

973

488

91,

160

0.11

7A

rmen

ia87

9413

116

833

60.

109

Kyr

gyz

Rep

ubli

c9

1137

7818

90.

086

Geo

rgia

274

181

230

239

303

0.05

8fY

R M

aced

onia

8173

106

174

213

0.04

0C

roat

ia64

174

788

51,

085

1,22

20.

036

Aze

rbai

jan

5710

418

217

122

80.

027

Lat

via

7211

213

817

323

00.

017

Lit

huan

ia50

7910

911

532

50.

015

Est

onia

39

1749

164

0.01

5P

olan

d1,

726

1,99

51,

989

2,65

52,

710

0.01

1B

elar

us13

914

914

022

224

40.

011

Slo

vaki

a18

2424

425

425

0.01

0U

krai

ne33

141

209

330

411

0.00

6R

ussi

a1,

275

1,40

31,

359

1,45

32,

668

0.00

5B

ulga

ria

5871

7267

103

0.00

4C

zech

Rep

ubli

c29

725

733

449

845

40.

004

Kaz

akhs

tan

122

171

205

148

167

0.00

4

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Southeast European and Black Sea Studies 443

Tabl

e 2.

(Con

tinu

ed)

Rem

itta

nces

in

mil

lion

of

US

$

2000

2001

2002

2003

2004

Rem

itta

nces

/GD

Pb i

n 20

04

Cou

ntri

esa

[1]

[2]

[3]

[4]

[5]

[6]

Hun

gary

281

296

279

295

307

0.00

3R

oman

ia96

116

143

124

132

0.00

2T

otal

8,82

310

,194

11,3

4014

,396

18,8

99–

a The

ord

er o

f co

untr

ies

is b

y th

e ra

tio

of r

emit

tanc

es/G

DP

pre

sent

ed i

n C

olum

n 6.

b Aut

hor’s

ow

n ca

lcul

atio

ns u

sing

dat

a fr

om t

he W

orld

Dev

elop

men

t In

dica

tors

dat

abas

e.S

ourc

e: W

orld

Dev

elop

men

t In

dica

tors

dat

abas

e; h

ttp:

//de

vdat

a.w

orld

bank

.org

/dat

a-qu

ery/

(ac

cess

ed 2

0 Ju

ne 2

006)

.

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444 A. Hoti

consequently decrease the labour supply of non-migrant household members (assum-ing that leisure is a normal good). Evidence for this is provided by Funkhouser (1992)for Nicaragua, Rodriguez and Tiongson (2001) for the Philippines, Konica and Filer(2005) for Albania and Amuedo-Dorantes and Pozo (2006) for Mexico. Second, inline with macroeconomic evidence, remittances increase the propensity of some non-migrant household members (males in particular) to engage in self-employmentthrough financing entrepreneurial projects. This may be particularly important fortransition and developing economies where the credit market is underdeveloped.Supportive evidence for this is again provided by Funkhouser (1992), Konica andFiler (2005) and Amuedo-Dorantes and Pozo (2006).

Emigrants from Kosova, remittances and brain drain

This section examines estimates regarding Kosova’s emigrants and their remittances.The Riinvest HLFS data are used to comment on the characteristics of emigrants andthe brain drain issue.

Estimates on emigrants and their remittances

As a consequence of its young population, persistent high unemployment and politicalunrest, the latter especially during the 1980s and the 1990s, Kosova has experiencedboth temporary and permanent mass emigration. During the socialist era, in the late1960s and early 1970s, many workers from Yugoslavia emigrated to Western Europe(West Germany in particular), which at that time experienced a shortage of labour(Zimmermann 1995). Moalla-Fetini et al. (2005) report that in 1973 the number ofYugoslavia’s emigrants reached 1.1 million (equivalent to 12% of Yugoslav’s labourforce). Emigration from Kosova broadly resembled that of Yugoslavia. In 1981, therewere some 27,000 emigrants from Kosova, while between 1981 and 1987 another50,000 emigrated.

Further large migration waves were witnessed following the break-up of theformer Socialist Yugoslavia (after 1989) and the poor economic prospects thatprevailed during the 1990s. There are no official data on emigrants either during the1990s or after the war of 1999. Bush (2004) uses data from the Demographic andHealth Survey (DHS) conducted by the Statistical Office of Kosova (SOK) in 2003and statistics from destination countries to estimate the number of emigrants in therange of 300,000–500,000. Moalla-Fetini et al. (2005) estimate approximately470,000 emigrants (that is around 20% of a total population estimated at 2.4 million).Among transition economies, only Albania has had a higher emigration rate.

Regarding remittances, Bush (2004) using DHS data estimates them at €174million annually. Moalla-Fetini et al. (2005) argue that this is an underestimationbecause of the following: (1) the household survey fails to capture infrequent remit-tances, (2) households may be hesitant to report the full amount of remittances out offear of drawing attention to their own finances, and (3) households may be reluctantto report remittances from household members working abroad illegally. They esti-mate annual remittances at €241 million. This is 13.4% of the 2003 estimated GDP(€1,797 million) and approximately 25% of imports in that year (€968.5 million).

In the Riinvest HLFS conducted in December 2002, 254 (20%) of 1252 house-holds in the sample received remittances (defined as ‘money received from householdmembers working abroad’). The average amount per month for those households who

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Southeast European and Black Sea Studies 445

receive remittances was €302. If distributed across all households, then on averageeach household in the sample received remittances of €61 per month. As such, remit-tances constitute 14% of the household monthly incomes of €428. They are thesecond largest income source after income from salaries. Assuming the number ofhouseholds in Kosova is 320,000, then annual remittances amount to €234 million –close to the estimates by Moalla-Fetini et al. (2005). Therefore, remittances are around13% of GDP, ranking Kosova among the top five in terms of the ratio of remittancesto GDP in transition countries (see Table 2).

Characteristics of emigrants and the brain drain issue

To examine the characteristics of emigrants and the extent of brain drain in Kosova,we turn again to the Riinvest HLFS data. The question asked to the household head(or the person replacing him or speaking on his behalf) in the interview was to providedetails of the household members abroad.2 Some 20% of households in the sampleresponded that they have at least one member abroad. Out of 8552 individualsaccounted in the sample, some 576 are emigrants (6.7%). It is relevant to note thatwhen an entire household has moved abroad, it is not included in the sample. This isone reason why we observe only 6.7% of population as emigrants compared to the20% estimated by Moalla-Fetini et al. (2005). This exposes a significant deficiency ofthe Riinvest HLFS data with regard to emigration and remittances.

The characteristics of these emigrants are presented in Column 1 of Table 3, whileColumns 2 and 3 show data for non-migrants and the total population respectively.These data indicate that emigrants are disproportionately of working age, males, fromrural areas and with upper-secondary education. As shown in Column 5, almost all ofthese differences between migrants and non-migrants are statistically significant (atthe 5% level). From Column 4, we can see that the emigration rate of males is almosttwice that of females (8.9% and 4.6% respectively).

As expected, there are large employment and wage differentials betweenemigrants and non-migrants. About 61% of emigrants aged 16–64 are workingcompared to 30% of non-emigrants. Note also that the labour–leisure choice of non-migrant household members is expected to be influenced by the additional incomeprovided by household members abroad. As such, the survey data indicate that 25%of non-migrants who are inactive in the labour market have at least one householdmember abroad, compared to only 18% of non-migrants who are active in the labourforce. The average monthly wage for emigrants is six times higher than for non-migrants (€1332 compared to €215). More than two-thirds of emigrants are inGermany and Switzerland. As discussed above, the first emigrants during the 1970swent to these countries, suggesting that migration networks contributed to the concen-tration of emigrants in these two countries. Some 49% of emigrants aged 16 and overremit, and among these the average amount remitted is €347 per month.

Regarding the brain drain, we find that 7.4% of the sample aged 25 and over withhigher education are emigrants. This is comparable to that found in other countries,but note that the Riinvest data do not include permanent emigrants and thereforeunderestimates the brain drain in Kosova. The brain drain is more pronounced in someoccupations. For instance, 13% of engineers and doctors in the sample have emigratedcompared to only 3% of lawyers and 6% of economists.

In Table 4, we quantify the brain drain assuming a population of 2.4 million. Basedon the distribution of population by age from the Riinvest HLFS, the population of age

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446 A. Hoti

Tabl

e 3.

Cha

ract

eris

tics

of

emig

rant

s fr

om K

osov

a ba

sed

on t

he R

iinv

est

HL

FS

(D

ecem

ber

2002

).

Em

igra

nts

( µ1)

Non

-mig

rant

s (µ

2)T

otal

pop

ulat

ion

Em

igra

tion

rat

eT

est

resu

lts:

H0:

µ1

= µ

2

[1]

[2]

[3]

[4]

[5]

Tot

al i

n th

e sa

mpl

e57

67,

976

8,55

20.

067

Gen

der

Mal

es0.

663

0.49

20.

503

0.08

9R

ejec

ted

Fem

ales

0.33

70.

508

0.49

70.

046

Res

iden

ce i

n K

osov

aU

rban

res

iden

ts0.

350.

446

0.44

0.05

4R

ejec

ted

Rur

al r

esid

ents

0.65

0.55

40.

560.

078

–A

ge (

aver

age

year

s)26

.37

27.3

927

.32

–N

ot r

ejec

ted

Age

gro

up0–

150.

220.

330.

320.

05R

ejec

ted

16–2

40.

180.

190.

190.

06N

ot r

ejec

ted

25–3

40.

370.

150.

170.

15R

ejec

ted

35–4

40.

150.

120.

120.

08N

ot r

ejec

ted

45–5

40.

050.

090.

090.

04R

ejec

ted

55–6

40.

030.

060.

060.

03R

ejec

ted

65+

0.01

0.05

0.05

0.01

Rej

ecte

d0–

150.

220.

330.

320.

05–

16–6

40.

770.

620.

630.

08R

ejec

ted

Ove

r 64

0.01

0.05

0.05

0.01

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Southeast European and Black Sea Studies 447

Tabl

e 3.

(Con

tinu

ed)

Em

igra

nts

( µ1)

Non

-mig

rant

s (µ

2)T

otal

pop

ulat

ion

Em

igra

tion

rat

eT

est

resu

lts:

H0:

µ1

= µ

2

[1]

[2]

[3]

[4]

[5]

Edu

cati

on l

evel

(ag

e 25

+)

Les

s th

an u

pper

-sec

onda

ry0.

277

0.48

90.

471

0.04

9R

ejec

ted

Upp

er-s

econ

dary

edu

cati

on0.

612

0.38

60.

405

0.12

6R

ejec

ted

Hig

her

educ

atio

n0.

111

0.12

50.

124

0.07

4N

ot r

ejec

ted

Ave

rage

yea

rs o

f ed

ucat

ion

(age

25+

)11

.08

9.92

10.0

2–

Rej

ecte

d

Occ

upat

ion

for

thos

e w

ith

high

er e

duca

tion

Tea

cher

0.07

0.18

0.17

0.03

–E

cono

mis

t0.

130.

170.

160.

06–

Law

yer

0.02

0.06

0.05

0.03

–E

ngin

eer

0.24

0.12

0.13

0.13

–D

octo

r0.

110.

060.

060.

13–

Lin

guis

t0.

070.

050.

050.

09–

Oth

er0.

370.

360.

360.

07–

In e

mpl

oym

ent

(age

16–

64)

0.61

0.30

––

–E

arni

ngs

in €

/mon

th f

or t

hose

em

ploy

ed1,

332

215

––

Cou

ntry

of

emig

rati

onG

erm

any

0.43

––

––

Sw

itze

rlan

d0.

22–

––

–O

ther

EU

cou

ntri

es0.

06–

––

–U

SA

and

Can

ada

0.04

––

––

Oth

er f

orm

er Y

ugos

lav

coun

trie

s0.

04–

––

–A

ll o

ther

cou

ntri

es0.

22–

––

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448 A. Hoti

Tabl

e 3.

(Con

tinu

ed)

Em

igra

nts

( µ1)

Non

-mig

rant

s (µ

2)T

otal

pop

ulat

ion

Em

igra

tion

rat

eT

est

resu

lts:

H0:

µ1

= µ

2

[1]

[2]

[3]

[4]

[5]

Yea

r of

em

igra

tion

for

the

fir

st t

ime

1970

–197

90.

03–

––

–19

80–1

989

0.12

––

––

1990

–199

90.

58–

––

–20

00–2

002

0.10

––

––

No

answ

er0.

18–

––

Rem

it (

age

16+

)Y

es0.

49–

––

–N

o0.

51–

––

–A

vera

ge a

mou

nt re

mit

ted

in €

/mon

th fo

r th

ose

emig

rant

s w

ho r

emit

(ag

e 16

+)

347

––

––

Ave

rage

am

ount

rem

itte

d in

€/m

onth

for

all

emig

rant

s (a

ge 1

6+)

170

––

––

Not

e: A

ll d

ata

in p

ropo

rtio

ns u

nles

s ot

herw

ise

stat

ed.

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Southeast European and Black Sea Studies 449

25 and over is estimated at 1,176,000. Following this approach, in Column 4 we findthat there are around 11,000 emigrants with higher education, which is equivalent tofour years’ output from higher education in Kosova. It is relevant to note here that theemigration rate of individuals with upper-secondary education is almost twice theoverall emigration rate.

Determinants of emigration from Kosova

Utilising the theorisations of migration summarised earlier, the Riinvest HLFS dataare used to investigate how personal, household and other contextual characteristicsinfluence the probability of being emigrant. In the following section, the estimationstrategy and the choice of explanatory variables are explored first followed by adiscussion on the main findings. In addition, acknowledging the large employmentdifferentials observed between emigrants and non-migrants, this section examines thechange in employment incidence if one moves abroad.

Estimation strategy and the explanatory variables

In the Riinvest HLFS, we observe household members that are abroad at the timeof the survey. Recapitulating the economic theory of migration, a person emigrates(Ei = 1) if the expected value of being abroad (Ve) net of the costs of the move (c)exceeds the expected value of staying (Vs), such that:

Therefore, the dependent variable is discrete, taking values of ‘1’ if abroad and ‘0’ ifnot. We employ the probit model to estimate:

EV c V

c Vie s

s

=− >− ≤

15

if

0 if Ve

( )

Pr ( | , , , ) ( )E A H Zi i i i i= 1 6ε

Table 4. Estimates of the brain drain in Kosova.

Proportion in the total populationa Population

Emigration ratea

Number of emigrants

[1] [2] [3] [4] = [2] × [3]

Total population 1.000 2,400,000b 0.067 160,800Population of age 25+ 0.490 1,176,000c 0.083 97,608Education level of the

population aged 25+Less than upper-secondary education

0.471 553,896c 0.049 27,141

Upper-secondary education 0.405 476,280c 0.126 60,011Higher education 0.124 145,824c 0.074 10,791

aRiinvest HLFS (December 2002).bEstimated by Moalla-Fetini et al. (2005) including emigrants.cAuthor’s own calculations by multiplying the respective proportion in the population from Column 1 with the total number of population.

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450 A. Hoti

where Ai, Hi and Zi stand for personal, household and contextual characteristicsrespectively and εi is the error term.

The three sets of explanatory variables are identified in Table 5. The likelihood ofemigrating is expected to decrease with age. For the more educated persons to be morelikely to emigrate then: (1) the returns to education abroad should be higher than athome, and (2), following our earlier discussion, emigration costs and risk shoulddecrease with education. In addition, the more educated are also more likely to havethe means to finance migration costs. The dummy for marital status controls for theeffect of family obligations, culture and attitudes towards emigration. Since temporaryemigration is expected to be mostly for employment purposes then marital status mayalso account for family arrangements regarding employment. In general, family tiesprevent mothers from undertaking temporary migration and may also deter the migra-tion of fathers (Mincer 1978), since a married person may have to take care of theirchildren and taking them abroad involves monetary and non-monetary costs.

Mora and Taylor (2006) stress the need to include household variables, as requiredin the new economics of migration. We expect that those from large households aremore likely to emigrate because other household members can take care of childrenand spouses left behind. Large households in Kosova are characterised by overlappinggenerations living together. The likelihood of emigration is expected to decrease withhousehold incomes. However, given that emigration involves costs, then higherhousehold incomes provide the financial means for covering the costs of the move,giving a non-linear relationship between the likelihood of emigration and householdincomes. We model for this by including the squared term of household incomes.

Since formal full-time jobs are more available in urban areas, we expect that ruralresidents are more likely to emigrate. In addition, agriculture is an important economicactivity for rural residents and incomes from this activity are more uncertain, which isexpected to further increase the likelihood of emigrating for rural residents. Finally,regional dummies account for any region-specific effect in the emigration decision

Table 5. The explanatory variables in the probit equation for the determinants of emigrationdecisions.

Explanatory variables Definition

Personal characteristicsAge Age of the personEducation Dummies: less than upper-secondary (the omitted),

upper-secondary and higherMarital status Dummy = 1 if married, 0 otherwise

Household characteristicsHousehold size Number of household membersHousehold incomes €/month per capita without including remittancesHousehold incomes squared €/month per capita without including remittances squared

Contextual characteristicsResidence Dummy = 1 if the person is from urban areas, 0 if from

rural areasRegional dummies Dummies for the seven main regions (omitted dummy for

the Prishtina region)

Source: Riinvest Household and Labour Force Survey (December 2002).

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Southeast European and Black Sea Studies 451

such as employment or wage differentials between regions. Note that, unlike mostother transitional economies, emigration in Kosova did exist before the marketsystem. This suggests that some network effects might be in place, increasing thepropensity to emigrate of individuals from regions that are characterised by a higherprevious emigration rate (such as the region of Gjilan).

We limit the sample to individuals aged 16–64 because we are interested in thedeterminants of emigration decisions of the working-age population. We also excludethose in full-time education and end up with 4891 observations (of whom 431 or 8.8%are emigrants). Table 6 gives the characteristics of this sample. We run separateregressions for males and females motivated by their large observed differences inemigration patterns and by our analysis above. There are insufficient observations(especially for emigrants) to allow for different slope coefficients between urban andrural residents.

Findings on the determinants of emigration

The findings are presented in Columns 1 and 2 of Table 7. In line with the theoreticalpredictions, for both genders the estimates suggest that the likelihood of being an

Table 6. The characteristics of the sample used in estimations of the probability of being anemigrant.

All Emigrants Non-migrants

Variables [1] [2] [3]

Observations 4,891 431 4,460Emigrants 0.088 1.000 0.000

Personal characteristicsGender (males) 0.505 0.703 0.486Age (average years) 35.480 31.740 35.841Education: less than upper-secondary 0.430 0.283 0.444Education: upper-secondary 0.465 0.624 0.449Education: higher 0.100 0.088 0.102Married 0.681 0.638 0.685

Household characteristicsFrom urban areas 0.443 0.350 0.452Household size (average members) 8.278 9.819 8.129Household incomes per capita (/month), without

remittances55.988 36.796 57.842

Contextual characteristicsPrishtina 0.281 0.251 0.284Prizren 0.154 0.139 0.155Peja 0.120 0.132 0.119Mitrovica 0.175 0.172 0.175Gjilan 0.123 0.176 0.118Ferizaj 0.092 0.070 0.095Gjakova 0.055 0.060 0.055

Note: Age group 16–64, all data in proportions unless otherwise stated.

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452 A. Hoti

emigrant decreases with age, ceteris paribus. For females, it increases with education.For males, the coefficient on upper-secondary education is significant while that onhigher education is not, though it has the expected positive sign. The coefficients onthe education dummies for males are jointly significant (χ2

(2) = 11.02, p = 0.0037).The estimates further suggest that being married has a negative effect on the like-

lihood of emigration for males and a positive effect for females. For the latter, it mightbe that when the female emigrates she often joins her husband abroad (i.e. she doesnot emigrate alone, which reflects the traditional nature of the Kosovan society).Similar findings regarding marital status are reported by Konica and Filer (2005) forAlbania.

Consistent with prior expectations, for both genders the estimates indicate that thelikelihood of being an emigrant increases with household size. Regarding householdincomes, evidence exists of a non-linear relationship between household incomes andthe probability of emigration; but the coefficients have the opposite signs to thoseexpected. However, the size of the coefficient on the squared term is small.

Table 7. Estimates from the probit equation for the determinants of emigration decisions.

Males Females

Coefficient z Coefficient z

Explanatory variables [1] [2]

Constant −0.972*** −5.54 −2.023*** −8.65

Personal characteristicsAge −0.008** −2.08 −0.015*** −3.26Upper-secondary education 0.273*** 3.35 0.512*** 4.90Higher education 0.172 1.37 0.652*** 3.29Married −0.187** −2.18 0.551*** 4.67

Household characteristicsHousehold size 0.027*** 3.37 0.051*** 5.01Household incomes −0.006*** −6.08 −0.005*** −3.38Household incomes squared 0.000005*** 5.57 0.000003** 2.22

Contextual characteristicsResidence (urban) −0.017 −0.23 −0.104 −1.02Prizren 0.021 0.19 −0.046 −0.30Peja 0.222** 1.95 −0.178 −1.02Mitrovica −0.076 −0.71 −0.025 −0.18Gjilan 0.247** 2.22 0.261* 1.82Ferizaj −0.276** −2.03 −0.135 −0.70Gjakova 0.097 0.60 0.122 0.61

Log likelihood −857.88 −439.69Likelihood Ratio test, χ2

(14) 122.98 122.34Pseudo R-squared 0.067 0.122Mean dependent variable 0.123 0.053Observations 2,470 2,421

***, **, * significant coefficients at 1, 5 and 10% respectively.Note: The dependent variable equals ‘1’ if emigrant and ‘0’ if not (population of age 16–64).

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Southeast European and Black Sea Studies 453

The estimates suggest that there is no significant difference in the probability ofbeing an emigrant between urban and rural residents; though, as expected, for bothgenders the coefficient has a negative sign. The coefficient on the dummy for the regionof Gjilan is significant and positive for males while for females it is close to beingsignificant at 5%. This region is known for its high emigration of males since the early1970s, suggesting a network effect that lowers the costs of emigration for residents ofthis region (e.g. lower costs of job search upon emigration, lower costs of settlement,etc.). The emigration rate for this region is 9.7% compared to the national average of6.7%. However, in the case of females, all six coefficients on regional dummies arejointly insignificant (χ2

(6) = 7.93, p = 0.2435). For males, three of them are significantat the conventional 5% level, and they are jointly significant (χ2

(6) = 20.98, p = 0.0018).In order to consider the size of the coefficients, we proceed by calculating the

probability of being an emigrant for a male and a female with some specific charac-teristics. As indicated in Panel A of Table 8, this probability is estimated at 0.09 formales and 0.01 for females. Increasing the age by 10 years but keeping other charac-teristics the same (see now Panel B), decreases the estimated probability by 1 percent-age point for males and by 0.4 for females. If with upper-secondary education, thenthe likelihood of being emigrant increases by 5 percentage points for males and by 2percentage points for females. Being married decreases this probability for males by3 percentage points, while for females it increases by 2 percentage points. Increasingthe household size from 8 to 12 members increases the probability of being anemigrant for males by 2 percentage points and by 0.5 for females. Finally, doublinghousehold income lowers the probability of being an emigrant by 4 percentage pointsfor males and by 0.06 for females.

Table 8. The estimated probability of being emigrant for certain values of the explanatoryvariables.

Male Female

A. The probability of being emigrant if: • Age 35.48 (sample average)• With less than upper-secondary education• Non-married• 8 members in the household (sample average)• Household incomes per capita net or remittances (56 €/month,

sample average)• From urban areas• From the region of Prishtina

0.09 0.008

B. The probability of being an emigrant in panel A, but now:• Age 25 0.10 0.012• Age 45 0.08 0.006• With upper-secondary education 0.14 0.030• With higher education 0.12 0.041• Married 0.06 0.033• 12 members in the household 0.11 0.014• Household incomes per capita (112 €/month) 0.05 0.004• Household incomes per capita (28 €/month) 0.12 0.012• From urban areas 0.08 0.006• From the region of Gjilan 0.13 0.017

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454 A. Hoti

Employment opportunities and emigration decisions

Earlier, we found that 61% of emigrants aged 16–64 are employed as compared to30% of non-migrants. Such a large difference in employment rates is expected to playa key role in emigration decisions in the case of Kosova. This section investigates thechange in the probability of being employed when a person emigrates, other thingsbeing constant. Since the Riinvest HLFS provides data on the employment status ofemigrants and non-migrants, these data are pooled together and a probit model is esti-mated where the dependent variable equals 1 if the person is employed in Kosova (inthe case of non-migrants) or abroad (in the case of emigrants) and 0 if not. The samesample as in the previous estimations is used.

The explanatory variable that is of interest is the dummy, 1 if emigrant and 0 ifnon-migrant. Other explanatory variables include education dummies that proxy forthe potential wage. Age and age squared account for work experience and also thechanging attitudes towards work with age. Finally, marital status (dummy equals 1 ifmarried) controls for the effect of family obligations as well as culture, attitudes andfamily arrangements regarding employment.

Findings are presented in Columns 1 and 2 of Table 9, for males and femalesrespectively. The coefficient on education dummies and age and age squared tell theexpected story that the probability of being employed increases with education andwith age (but at a decreasing rate). As expected, the coefficient on the dummy variablefor emigrants is positive and highly statistically significant for both genders, indicat-ing an increase in the likelihood of being employed if abroad. This is expected to bea key determinant in emigration decisions.

In order to examine the practical significance of being abroad on the probability ofbeing employed, we work out this probability for a person with specific characteris-tics. From Table 10, for a male (female) who is 35 years old, with less than upper-secondary education, married and non-migrant, the probability of being employed is0.49 (0.09). For a similar male (female) but who is abroad this probability is 0.71

Table 9. Estimates from the probit model on the probability of being employed.

Males Females

Explanatory variables Coefficient z Coefficient z

Constant −2.999*** −10.86 −3.503*** −9.96Age 0.130*** 7.98 0.118*** 5.79Age squared −0.002*** −7.88 −0.001*** −5.57Upper-secondary education 0.399*** 6.21 0.766*** 10.64Higher education 0.897*** 9.61 1.489*** 12.53Married 0.334*** 4.42 −0.173** −2.15Emigrant 0.581*** 6.95 0.737*** 6.04Log likelihood −1499.06 −927.96Likelihood Ratio test, χ2

(6) 423.17 340.12Pseudo R-squared 0.124 0.155Mean dependent variable 0.517 0.169Observations 2,470 2,421

***, ** significant coefficients at 1 and 5% respectively.Note: The dependent variable equals ‘1’ if employed (in Kosova for non-migrants and abroad for emigrants) and ‘0’ if not.

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Southeast European and Black Sea Studies 455

(0.28). Note that for females there is a large increase in the likelihood of beingemployed if abroad, at each level of education. This may indicate that the existing lowemployment rate for females in Kosova is not primarily due to attitudes and familyarrangements regarding employment, but rather to depressed conditions in theKosovan labour market.

Conclusions

The data and literature analysed in this paper aim to contribute to our knowledge ofthe determinants of emigration decisions in transition economies, and more specifi-cally in Kosova.

The available data suggest that, compared to other transition economies, Kosovaranks highly both with regard to the rate of emigration of the labour force and to theratio of remittances to GDP. Aggregate estimates suggest that some 20% of popula-tion is abroad, while the household data indicate that around 20% of households haveat least one member abroad. Compared to other transition economies, only Albaniahas such a high emigration rate. Remittances that these emigrants send home are thesecond largest source of household incomes (after income from salaries). From thisperspective, emigration has an important effect on the size of the domestic labourforce and on the level of household spending, and is therefore an important elementof any labour market analysis in Kosova.

These findings are largely consistent with the standard economic theory of migra-tion and with results found for other countries in that the likelihood of emigrationdecreases with age and generally increases with education and household size. Theestimates suggest that marital status affects negatively (positively) the likelihood ofbeing an emigrant for males (females). Unlike evidence from several other countries,the estimates presented in this paper indicate that the likelihood of being an emigrantdecreases with household incomes. Moreover, the data presented suggest positivenetwork effects. The finding of a sizeable increase in the probability of beingemployed for a person who is abroad, compared to an otherwise similar person whois living in Kosova, is consistent with what has been described here as being charac-teristic of a large temporary emigration from Kosova for employment purposes.

Concerning the brain drain effect of emigration, the estimates suggest that some7.4% (around 11,000) of individuals with higher education are abroad, which is equiv-alent to four years’ output from higher education in Kosova. This is in line with the

Table 10. The estimated probability of being employed for emigrants and non-migrants.

Non-migrant Emigrant

Male Female Male Female

[1] [2] [3] [4]

The probability of being employed if age 35, married and with:• Less than upper-secondary education 0.490 0.092 0.710 0.276• Upper-secondary education 0.645 0.286 0.830 0.568• Higher education 0.808 0.563 0.927 0.815

Data Source: The estimated coefficients from Table 9 in the previous page.

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456 A. Hoti

situation found in many other developing countries, but note that our estimates do notinclude permanent emigrants and therefore underestimate the brain drain in Kosova.There are social costs and social benefits from the emigration of the work force, espe-cially highly skilled workers. The social costs consist of the public spending on theireducation and the absence of positive externalities to the society from a larger educatedwork force. It is difficult to know whether their remittances outweigh these costs.However, given poor employment prospects in Kosova, temporary emigration remainsa necessary short-term strategy for reducing unemployment. Given that the post-wareconomic reconstruction is almost over, such as rebuilding the destroyed houses andthe basic infrastructure, there is the possibility that emigration and thereforeremittances might fall. This is likely to result in a reduced aggregate demand in theshort run and projections regarding macroeconomic indicators should consider this.

AcknowledgementsThe author would like to thank Professor Nick Adnett and Jean Mangan (Staffordshire Univer-sity, UK) as well as participants at the conference on ‘Migration and Development in Albaniaand Western Balkans’, held in Durrës (Albania) during 26–27 September 2008, for very usefulcomments on an earlier draft of this paper. Special thanks go to Riinvest Institute for providingthe data for my research.

Notes1. Note, however, that migration flow data are likely to be inaccurate due to problems of

definition, unrecorded migration, etc.2. In 95% of cases it was the household head who was interviewed – suggesting that survey

responses were fairly accurate.

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