Recent trends and economic impact
of emigration from Latvia
OECD/MFA Conference
Riga, December 17, 2012
Mihails Hazans
University
of Latvia
Institute for the Study of
Labor (IZA)
Summary -1: The Exodus
• Since the beginning of the 21st century,
Latvia has lost 9% of its population
(including almost 14% of working-age
population) in several waves of emigration
• The most recent wave is the strongest
migration response to the economic crisis
among the EU member states
Summary – 2 : A threat and a resource
• According to a recent (2012) survey, 77% of Latvia's
population perceive emigration as the single largest
threat to the country
• Yet potentially large economic benefits from investment,
trade and transfer of skills can be derived with the help
of Latvian Diasporas - directly or by fostering return
Summary - 3
• Despite recovering economy, emigration
shows only weak signs of slowing down,
while emigration potential remains high.
• Recent emigrants are more likely to move
in full families and less likely to return.
• Lack of jobs and low earnings remain the
leading reasons for emigration, yet noneconomic reasons (uncertainty, general
dissatisfaction, etc.) are gaining
importance, especially among university
graduates
Net emigration from Latvia, 2000-2011
Emigration and immigration (1000), 2000-2011:
Top – CSB version; Bottom – corrected (CSB_Hazans)
Emigration may have slowed down from the 2010 peak,
but has it slowed back down to the pre-crisis level?
Net emigration of Latvian nationals
by destination, 2000-2011
Emigrants from Latvia (aged 22+) by completed
education at the end of 2010 (relatives’ survey data)
100%
80%
31
24
32
23
25
36
15
28
30
36
27
Tertiary
60%
Secondary
40%
Basic or less
NA
20%
Period of moving
Ethnicity and citizenship
Host country
Total
Other/NA
Continental Europe
Ireland
UK
Minority/Other
Minority/Latvian
Latvian/Latvian
2009-2010
2004-2008
2000-2003
0%
Estimated percentiles of emigrants' last earnings from all jobs as
proportion of median earnings of all legally employed persons in
the same month, 2005-2011
• Relative domestic productivity of the top half of emigrants with
[legal] work experience was falling dyring the growth periods
and rising during the recession brain drain risk is higher in
the times of crisis
• Domestic legal earnings of most emigrants were below median
Elapsed duration of
stay abroad
Host country
Education
Ethnicity
and
citizenship
Latvian emigrants' plans to return within
6 months and within 5 years, 2011/01
Minority/Other
Minority/Latvian
Latvian/Latvian
Tertiary
Secondary
Basic or less
Other/NA
Continental Europe
Ireland
UK
5 - 11 years
3 - 5 years
2 - 3 years
1 - 2 years
Less than 1 year
Total
0%
5%
10%
15%
20%
25%
30%
Plans to return within the next 6 months
Plans to return within 5 years (but not within 6 months)
35%
40%
Economic impact (1)
• Emigration has contributed significantly to
decline in unemployment and NAIRU...
• ...but also to emerging labour shortages (now
reported as limiting factor by 20% of construction
enterprises and big manufacturing firms;
elsewhere this rate is <10%);
• ...which certainly will become a serious
challenge in the near future
• Emigration has a positive effect on real wages
• Different approaches all indicate a significantly
negative long-term effect of emigration on
Latvia’s GDP, but the size of the impact varies
Economic impact (2)
• Estimated effect on GDP does not account for losing “the
key employees” on one hand and for lower than average
domestic productivity of most emigrants on the other
• Remittances reduce negative effect on GDP by about
50%, but for how long?
• By reducing population and hence the domestic market
size, emigration discourages investment - both foreign
and domestic
• Economic theory and evidence from other countries
suggest that FDI from and export to countries hosting
recent LV emigrants could increase (yet to happen!)
• Should we see the Diasporas (rather than the host
countries) as potential trade partners and FDI sources?
Emigration has contributed significantly to decline in
unemployment and helped to contain social spending
•
•
In 2005-2011, for 50 000 emigrants with labour market experience (31% of
all such emigrants), the last registered economic activity was
unemployment; in 2010-2011 this proportion was above 40%, and
emigration directly reduced unemployment rate by at least 1 point.
Emigration caused fall in U rate by 2.4 points in 2004-2008 (Barrel et al.
2007) and decline in NAIRU by 0.4 points in 2003-2010 (Zasova & Hazans).
Net emigration and job vacancy rate, by sector.
2005Q1-2012Q2
Thank you!
• [next slide compares emigration during
2000-2011 across the three Baltic
countries –for discussion]
Population change in the Baltics,
2000-2011 (% of the inititial population)