Methodology, results and recommendation of
the project
„To consume or to self-employ: Evidence from
the usage of remittances in Macedonia “
Branimir Jovanovic
National Bank of the RM
and Tor Vergata, Rome
Introduction
• Remittance flows in Macedonia amount around 4%
of GDP (2004-2013)
– Almost the same as foreign direct investment flows
• Macroeconomic implications relatively well-known
– Microeconomic ones mush less
– Which brings us to the objective of this research – to
analyse the effects of the remittances on the standard of
living, i.e. poverty, income inequality and selfemployment…
• By analysing two household (HH) surveys
The surveys
• First one – conducted in 2008, on 1211 HHs,
for the project Development on the move
• Second one – conducted by our team, in 2012,
on 1000 HHs
Average
% HHs amount of Estimate of
with
remit. total remit. Remittances
remitt.
(euro) (mil. euro) World Bank
Poverty Poverty,
from the Statistical
surveys
office
Inequality
from the Inequality,
surveys
World
(Gini) Bank (Gini)
2008
15.7
1992
167.5
276.9
25.7%
29.4%
46
44.2
2012
20.7
2068
230.6
293.9
17.9%
30.4%
35.2
NA
Usage of remittances
Consumption
Family events
Property
Pre
Investment
44.1%
Consumption Investment
Male-headed
7.4%
Female11.0% 12.20%
40.20%
headed
Education
Post
8.7% 1.00%
Macedonian
47.90%
10.1%
2.9%
7.9%
Health
9.7%
Albanian
Investment
Poor
6.6%
2.9%
3.7%
Non-poor
7.7%
Urban
6.2%
0.0%
Savings
Debt repayment
8.1%
Rural
4.1%
Remittances for HHs with different
welfare
• The share of remittances in
consumption is much higher
Quartile
Average
% of
for HHs down on the
of
remittances remittance in
consumption ladder
consump
tion
(euro)
consumption
1st
312.5
2nd
253.5
– That implies that remittances
help alleviate poverty
• However, the absolute
97.35
amount of remittances is
much higher for richer HHs
44.05
3rd
486
62.55
4th
428.5
31.85
– That implies that remittances
might actually increase
inequality
Albanian HHs receive more
remittances than Macedonian HHs
Albanian Macedonian
Average consumption (euro)
4284.5
4227.5
Average remittances (euro)
663
266
Share of households getting
remittances (%)
30%
15%
% of remittance in
consumption
27%
8%
The research
• Econometric techniques (regression analysis)
• 3 sub-analyses:
1. remittances and poverty
2. remittances and inequality
3. remittances and self-employment
• Before and after the economic crises
• For rural/urban HHs, male-headed/femaleheaded, Albanian/Macedonian
Remittances and poverty
• Female-headed HHs 7% less likely to be poor
• HHs from Skopje have 7% lower probability to be poor. No
difference between other urban and rural places.
• No difference between Macedonian and Albanian HHs
• HHs had 9% lower probability to be poor in 2012
• Remittances lower the probability to be poor. 2000 euro
more remittances=5% lower probability to be poor
• Significant difference between Macedonian and Albanian
HHs in this respect – remittances do not lower poverty for
Albanian HHs. Maybe because 30% of Albanian HHs receive
remittances, vis-à-vis the 15% of Macedonian HHs.
• The effect of the remittances on the poverty remained
unchanged during the crisis
Remittances and self-employment
• Albanian HHs 6% less likely to own a business
• Location also matters - HHs from Skopje 4% less
likely to own a business than rural or other urban
HHs.
• HHs had 5% lower probability to own a business
in 2012
• Remittances increase the probability for selfemployment, but only marginally. 2000 euro
more remittances = 1% higher probability
• Remittances-self-employment link is same for
Macedonian/Albanian HHs, rural/urban, maleheaded/female headed, pre-/post crisis
Remittances and inequality
• The simulations suggest that,
overall, remittances reduce
Gini coefficient
inequality.
Actual Consumption
•
The
inequality-reducing
consum
without
effects is particularly present
ption
remittances
after the crisis.
2008 0.46
0.45
• Before the crisis, remittances
2012 0.352
0.383
slightly increased inequality.
• This holds both for
Тotal 0.412
0.426
Macedonian and Albanian
HHs
Summary of findings
• Remittances, one of the most positive phenomena in the
Macedonian economy in the last decade, continue to grow,
despite the recent crisis.
• The upward trend in the remittances is both due to the
increased share of HHs that receive remittances and the
increase in the average amount of remittances per HH.
• Remittances are found to have positive effects on the
standard of living in Macedonia.
• Remittances are found to reduce poverty.
• They are found to increase self-employment.
• They are found to reduce inequality, especially during the
crisis.
Policy recommendations
• Since remittances reduce poverty and
inequality, sudden stop in these flows may
imply increase in poverty and inequality
• Therefore, policy-makers should try to
alleviate this, if such reversal occurs
• Also, remittances are mostly used for
consumption, not so much for investment (i.e.
self-employment)
• Why?
Measures to increase investment
• The 2012 survey asked HHs to point out factors that
could improve the effect of remittances.
• 14% pointed out at improving the business climate
• 13% at encouraging migrants to invest
• 12% at improving the public infrastructure
• 12% at improving effectiveness of the public
administration
• 12% at safety
• Only 7% at lowering taxes
• 7% said that nothing can be done