Do Agrarian Households use International Migration as an Income Diversification Strategy?
Evidence from Albania.
Ayuba Seidu and Gulcan Onel
Abstract
The overarching assertion in the applied migration literature is that rural households
typically use international migration to transition out of the agricultural sector, especially in
transition economies. These studies base their conclusions on the labor effects of international
migration, while ignoring the fact that international migration could have indirect effect on
migrant-sending households through remittances sent back home. Additionally, these studies
restrict their analyses only to the farm sector. If farm households are using international migration
to transition out of farming, do we find evidence in the nonfarm sector? Will this conclusion
change when we account for the income effect of international migration?
Using a nationally-representative dataset, we re-evaluate the notion that agrarian
households in Albania use international to exit farming. The objective of this paper is two folds.
First, we empirically examine if availability of international migrants and remittances in rural
Albanian households have any effect on their nonfarm labor reallocation decisions and incomes.
Second, when we estimate the determinants of incomes from farm and nonfarm activities, we
include remittances in the system as an explanatory variable. This allows us to test whether
international migration, if it results in remittances, has an indirect effect on households’ farm
income. A positive and significant effect on farm income would suggest that previous studies likely
underestimated the overall impact of international migration on agricultural production in rural
Albania. Specifically, we test the following three hypotheses: H1) international migration and
remittances are positively related to local nonfarm activity participation; H2) international
migration and remittances are positively related to local nonfarm activity incomes; H3)
international migration and remittances are negatively related to farm income. Only evidence on
all three hypotheses would support the common notion that international migration is causing outagriculture flows in rural Albania. Such an integrated approach would present policymakers with
sound empirical foundation to guide their decisions and rural development policies.
We find limited evidence to support the above assertion. Specifically, we find that migrant
remittances help relax liquidity constraints in setting up microenterprises, and are positively and
significantly associated with income from a household’s own farming activities—cropping and/or
livestock rearing. The reduced labor impact of international migration is found to be statistically
insignificant. Overall, our empirical findings support the basic tenets of rural income
diversification, where the farm household has a diversified portfolio of income-generating
activities in addition to farming. The results suggest that international migration facilitates income
diversification among Albanian farm households rather than their exit out of agriculture.
Palestinians’ access to the Israeli labor market: Effects on the West
Bank economy
Johanes Agbahey1*, Khalid Siddig1, 2, Harald Grethe1
Abstract (suggested length ca. 150 words)
The integration of the Israeli and Palestinian labor markets has for a long time attracted attention
due the political-military conflict between the two regions and the associated mobility
restrictions. In the 1980s, access to Israeli labor markets accounted for a significant share of the
total Palestinian employment. However, following the first and second Palestinian uprisings,
barriers to labor mobility have been put in place and enforced. Depending on the intensity of the
political tension, restrictions are either set at a high or at a low level. Taking advantage of this
unique context, this study for the first time addresses the economy-wide effects of labor market
liberalization between the two regions on the Palestinian economy. The study uses a SAM
developed for the West Bank for the year 2011 with detailed representation of the labor markets.
Workers are categorized based on their demographic characteristics, their current workplace and
their eligibility to obtain a permit for working in Israel. The behavioral relationships in a variant of
STAGE suite of CGE models are extended to conform to the unique feature of the labor markets
between West Bank and Israel. This paper analyses the effects of increasing the number of
Palestinian workers in Israel from the actual 14% of total workers observed in 2011 back to 30%
which was the level observed in the 1980s before the introduction of restrictions.
Five Keywords: labor market, migration, barriers, CGE, Palestine.
Motivation and Research Questions (suggested length: ca. 500 words)
The Israeli labor market is characterized by a shortage of low-skilled labor, while the Palestinian
labor market faces an excess of this category of labor and generally a growing unemployment
rates. In the 1980s, Palestinians working in Israel accounted for more than 30% of total Palestinian
employment (Bulmer, 2003). This situation benefitted both sides. From an Israeli perspective,
Palestinian labor is cheap and hardly competes with native labor for low-skilled work (Rosenhek,
2006). From a Palestinian perspective, job opportunities in Israel are an important source of
income as wages in Israel are substantially higher than wages in Palestine (Miaari and Sauer,
2011). Despite the benefits of integrated labor markets for both sides, political tensions have led
to extensive border restrictions (Mansour, 2010). Between 1999 and 2004, the share of
Palestinians working in Israel fell from 23% to 8% (Flaig et al., 2013). As a result, unemployment
rose sharply in the Palestinian territories. Previous studies dealing with the integration of
Palestinian and Israeli labor markets either lack the economy-wide effects of such integration
(Bulmer, 2003; Mansour, 2010) or they address only from the perspective of the Israeli economy
1
Agricultural and Food Policy Group (420a), Universität Hohenheim, (Germany)
Department of Agricultural Economics, Khartoum University (Sudan)
* corresponding author: johanesagbahey@gmail.com
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(Flaig et al., 2013). Therefore, developing a general equilibrium model for Palestine with detailed
representation of the linkages between the Israeli and the Palestinian labor markets in order to
investigate the economy-wide effects of relaxed labor migration is needed. As migration of Gazan
workers to Israel has been banned since the takeover in Gaza by Hamas in 2007, we only focus
on the West Bank territory. This paper firstly describes the development of the model and
secondly applies this model to a scenario of labor market liberalization.
Data and Methods (suggested length: 150 words)
Model and Data
The model used in this study belongs to the STAGE suite of single country CGE models. STAGE
uses a combination of linear and non-linear relationships governing the behavior of the model’s
agents (McDonald, 2009). The main model development for this study is the extension of the
domestic production module from two to a seven-level production process in order to better
capture the reality of the labor markets in the West Bank. Aggregate value added is defined as a
series of CES aggregates of inputs where relative prices determine the optimal combinations of
these inputs. West Bankers either work in the domestic labor market, or in Israel where they
commute on quasi daily basis. Workers in the domestic market are divided firstly into two groups
based on their education level; secondly they are categorized according to their employment
sector; thirdly they are disaggregated by gender; and finally they are classified according to their
eligibility to work in Israel. West Bankers already working in Israel are disaggregated according to
whether they have a work permit in Israel or not.
The model is calibrated to a West Bank SAM for 2011 (Agbahey et al., forthcoming). This SAM is
the first to detail labor account in the West Bank, in contrast to previous SAMs (Astrup and
Dessus, 2001; Missaglia and Valensisi, 2010). This SAM has several distinctive features including
its differentiation between 57 labor groups; its inclusion of 83 products and 49 activities; its
detailed representation of households by 111 accounts and its separation of the foreign account
into two, namely Israel and Rest of the World. Furthermore, accounts for custom duties, excise
tax, value added tax and factor tax collected by the Israeli government on behalf of the Palestinian
National Authority are separated from those collected domestically because taxes domestically
collected constitute direct government income whereas taxes collected by Israel may be
temporarily withheld and thus not constitute direct government income.
Simulation
Beside the base simulation that reflects the status quo, a counterfactual scenario with an increase
of Palestinians working in Israel from the actual 14% of total workers in 2011 back to 30% which
was the level observed in the 1980s before the introduction of restrictions following the first
Palestinian uprising is simulated in this study. The high unemployment rate of 17% in the West
Bank and the gap between wages in the West Bank and Israel supports the assumption that an
increased ratio of Palestinians working in Israel can be met. Accordingly, our model assumes that
labor can move across the two regions (West Bank and Israel).
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Expected results (suggested length: 200 words)
Increased Palestinian labor in Israel will result in a moderate decline of the average Palestinian
wage in Israel but a tremendous increase in the total factor income received by Palestinian
workers. There will be positive effects on the economy as GDP grows, owing to increased public
and private consumption in the West Bank. The increased consumption will drive up domestic
production moderately, and import substantially. Regarding distributional effects, welfare gains
will accrue essentially to households in the lowest quintiles with the highest shares of low-skilled
members. This is supported by the fact that most jobs for Palestinians in the Israeli market are
suitable for low-skilled workers. Moreover, households with previously no member working in
Israel will experience higher welfare gains. Households with members already working in Israel
and without extra member in workforce will experience a welfare loss, as individual wages in the
Israeli market decrease. For the economy as a whole, welfare gains are expected to offset losses.
References
Agbahey, J., Siddig, K., Grethe, H., Boysen, O., forthcoming. A 2011 SAM for West Bank with a
detailed representation of the labor markets and income distribution. Hohenheim, Agricultural
and Food Policy group.
Astrup, C., Dessus, S., 2001. Trade options for the Palestinian economy. MENA working paper 21.
Washington, DC, World Bank
Bulmer, E.R., 2003. The Impact of Israeli Border Policy on the Palestinian Labor Market. Econ. Dev.
Cult. Change 51: 657–676
Flaig, D., Siddig, K., Grethe, H., Luckmann, J., McDonald, S., 2013. Relaxing Israeli restrictions on
Palestinian labour: Who benefits? Econ. Model. 31, 143–150.
Mansour, H., 2010. The effects of labor supply shocks on labor market outcomes: Evidence from
the Israeli–Palestinian conflict. Labour Econ. 17, 930–939.
McDonald, S., 2009. STAGE Version 1: July 2007. Course Documentation
Miaari, S.H., Sauer, R.M., 2011. The labor market costs of conflict: closures, foreign workers, and
Palestinian employment and earnings. Rev. Econ. House. 9, 129–148.
Missaglia, M., Valensisi, G., 2010. A trade-focused, post-Keynesian CGE model for Palestine. In
Vaggi, G., Missaglia, M., Kattan, F. (eds) The Palestinian Economy. Pavia University Press: 87-120
Rosenhek, Z., 2006. Incorporating Migrant Workers into the Israeli Labour Market? CARIM-AS
2006/10. Florence, European University Institute
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Do Off-farm Income and Remittances Alter Household Food Consumption Patterns?
Evidence from Albania
Presenter:
Gulcan Onel
University of Florida,
Food and Resource Economics Department
PO box 110240
Gainesville, FL 32611-0240
Email: gulcan.onel@ufl.edu
Phone +1 (352) 294-7657
Abstract
Rural economy in developing countries extends beyond agriculture, pointing to the
existence of a large off-farm economy. Agricultural production is risky; therefore, farm
households seek to diversify their income by reallocating part of their labor to off-farm work
and/or by sending some members of the household away as migrant workers. These income
diversification strategies have implications for household’s food consumption patterns as much
as its production decisions. For instance, a farm household with off-farm income is less
vulnerable against food consumption fluctuations compared to a household without off-farm
income. Off-farm income and remittances received from migrant household members could also
relax liquidity and credits constraints, helping households make productivity-enhancing
investments on the farm. This could, in turn, increase households’ subsistence food consumption.
On the other hand, off-farm income may also decrease household’s food consumption
expenditures. First, off-farm income opportunities may encourage increased nonfood
consumption expenditures. Second, reallocating household labor off the farm could sometimes
negatively affect farm production, which could, in return, reduce subsistence food consumption.
This is particularly true in an incomplete farm labor market, where the family labor lost to nonfarm work cannot be easily replaced.
This paper examines the impact of off-farm labor reallocation decisions (including
migration) on food consumption patterns and food security in transitional Albania. Using a
nationally representative dataset, we estimate the impact of participation in different off-farm
work on food consumption expenditures. We consider a two-stage system of food expenditures.
In the first stage, we categorize food as food at home (henceforth FAH) and food away from
home (henceforth FAFH). In the second stage, we examine disaggregate FAH groups—staple
food, meat, dairy, fruits and vegetables, oil, and other miscellaneous food items. We hypothesize
that off-farm income may contribute to maintaining food security via increased expenditures on
relatively nutritious food. For Albania, we identify off-farm income sources as nonagricultural
wage income, nonagricultural self-employment income, and international remittances from
current household migrants. The detailed analysis allows us to determine how dependent a
household is on the local nonfarm economy in maintaining food and nutrition security. To the
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best of our knowledge, this is the first study to provide a rigorous analysis of the impact of
portfolio of off-farm incomes on food consumption patterns in Albania.
The data are from the 2005 Albanian Living Standard Management Survey conducted by
the Albania Institute of Statistics and the World Bank. The food consumption data were collected
by means of a 14-day diary. The diary contained information on purchased food items, nonpurchased food items (own produced and received as gift), bulk purchases before the reference
period, and food eaten outside. The first three categories are aggregated as FAH, and the latter as
FAFH. After deleting observations with missing values, data on 1383 rural farm households are
used for the empirical analysis. We use Working-Lesser Model, which relates budget shares of
commodities linearly to the log of total expenditures.
Empirical results show that all three off-farm income variables exert positive and
significant impact on total FAH expenditures, with international remittances having the highest
impact. On FAFH, we find that each of the off-farm income variables leads to higher propensity
to eat outside the home; however, given this decision, only nonagricultural wage employment
and international remittances exert positive and significant impact on FAFH expenditures.
Estimates on disaggregated food groups reveal interesting food consumption patterns. These
results should generate considerable discussion as they have implications for the design of
strategies to ameliorate food security in rural Albania.
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IATRCProposedSessionforIAMOForum2016:Paperabstract
MigrationvsAgriculturalProtectionforReducingRuralPoverty:thecaseofIndonesia
RichardBarichelloandFaisalHarahap,UniversityofBritishColumbia,Vancouver
Canada.Email:richard.barichello@ubc.ca
Migrationisanimportantelementofhumancapital,andisgenerallyameansof
achievinghigherincomesforthosemove,eitherregionallyoracrossoccupations.As
aresult,policiesthatfavourmigrationareconsideredbysometobeanimportant
elementofreducingpoverty,includingruralpoverty.Butothersarguethat
supportingagriculturalprices,suchasbyimportprotection,isalsoaneffectiveway
toreduceruralpoverty.Inthispaperweexamineagriculturalwageratesto
measurethedegreetowhichtheyareaffectedbyagriculturalpoliciesandthe
degreetowhichtheyareaffectedbynon-agriculturalwageratesthatattract
migration.WedothisforIndonesiaovertheperiodfrom1983to2009employing
timeserieseconometrics,andfindthatoff-farmwagerateshaveamuchstronger
longruneffectonagriculturalwageratesthandofarmprices.Theimportantpolicy
implicationisthatagriculturalprotectionhasasmalleffectinreducingrural
poverty,whileenhancedruraltourbanoragriculturaltonon-agriculturalmigration
ishighlyeffective.
Keywords:domesticmigration,poverty,farmwagerates,importprotection