Transcript Determinants of Migrant Earnings: The Case of Kosovo

Kosovo
The Role of Remittances for Kosovo’s
Economy
Sokol HAVOLLI
Central Bank of the Republic of Kosovo
Senior Economist
This presentation reflects the views of the author and does not necessarily express the views of
the Central Bank of the Republic of Kosovo.
Remittances Study Launch 2010
November 2010, Prishtina
Table of Contents:
1) Introduction and stylized facts
2) Migrants’ Remittances
3) Migrants’ Investments
4) Policies Undertaken by Other Countries
5) Conclusions
Introduction and stylized facts

More than 75% of Kosovo emigrants are settled in: Germany, Switzerland, Italy
and Austria.

The remainder: in Scandinavian countries, UK, USA, France, etc.

The host country is an important determinant of migrants’ earning potential.
 Estimates show that the yearly earnings of Kosovo migrants are over 4bn Euro.
 Savings and remittances compose 28% and 12% of total earnings, respectively.
 This shows that there is a substantial potential for investments in home country by
the migrants.
Migrants’ Remittances
 Remittances represent one of main
components Current Accout.
Figure 2: Remittances
600
 During 2009 remittances reached
euro 505 million (14% of GDP)
535
2007
2008
467
500
400
521
505
418
357
300
200
100
 This represent a decrease of 5.5%
compared to 2008.
0
2004
2005
2006
Remittances
 Remittances decreased as a result of
increasing
unemployment
in
developed countries.
 In the first half of 2010, remittances
increased by 1.3%
2009
Migrants’ Remittances
 Remittances mostly used to finance
consumption.
Figure 3: Remittances
600
 Trivial part of remittances used to
finance investments.
535
2007
2008
467
500
400
521
505
418
357
300
200
100
 Small portion of remittances is also
used to finance:
 Home repairs,
 Education,
 Health expenses.
0
2004
2005
2006
Remittances
2009
Migrants’ Remittances
 The main determinants of remittances are:
 Migrants’ income,
 Years since migration,
 Perceived business environment,
 Migrants’ investments in home country.
 This shows that, at least, the business environment could be improved in order to
influence migrants’ remittances.
Migrants’ Investment
 Moreover, an empirical investigation shows that migrants investments are also
highly dependent on:
 Migrants’ perception about the business environment,
 Age of migrants
 Migrant earnings
 To date, there have been identified several important investments by migrants
(i.e. participation of migrants in privatization around 15% of total).
 However, migrants investments still do not represent an important driver for
economic growth in Kosovo.
Policies Undertaken by Other Countries
Government Policies and initiatives
Type of Policy
Initiative
1
2
3
4
5
Private Initiatives
6
7
8
9
10
11
12
13
Ministry
for Diasp.
Other Gvt
incent.
Remit.
through
phone
Banks in
Host Country
Loans for
invest.
Deposit scheme
1
0
1
0
1
1
0
0
1
0
1
0
1
0
0
0
0
1
1
0
0
0
0
1
1
0
1
0
1
1
0
0
0
1
0
1
1
1
0
0
0
0
0
1
0
1
1
1
0
1
0
0
1
0
0
0
0
0
1
0
1
1
0
0
0
1
0
0
0
0
Sri Lanka
0
0
0
1
0
0
0
1
1
0
0
1
0
Tunisia
0
0
0
0
1
1
0
1
0
0
0
0
1
Armenia
0
0
0
0
0
0
0
1
0
0
1
1
0
Number of
Countries
Applying the
Policy
4
6
4
20
8
6
3
13
10
1
8
5
3
Legal
support
Invest.
Policies
Exch. rate
policy
Financial
Services
Import
support
Busin.
Fee
advisory serv. reduction
Mexico
1
1
0
1
0
1
Turkey
1
1
1
1
1
India
0
1
1
1
Bangladesh
0
0
1
Columbia
1
0
Philiphines
0
Egypt
Top 10 Countries
Conclusions
 Migrants potential should be used and addressed. Especially knowing their
potential for investment and remittances.
 Migrants investments would also be a very good signal for Foreign Direct
Investors.
 Considerable proportion of FDI consists of joint investments of migrants and
foreign investors.
 Kosovo should design policies which would be beneficial for migrants and
increase its attractiveness to them