KOSOVO Remittance Report 1 REMITTANCE 0 › content › dam › kosovo › docs › Remitances › ...Kosovo Remittance Study 2012 Foreword It is widely recognized that the Kosovo

KOSOVO Remittance Report

Koso

vo R

emitt

ance

Stu

dy 2

012

Empowered lives.Resilient nations.

2012 KOSOVO

REMITTANCE STUDY

3

Koso

vo R

emitt

ance

Stu

dy 2

012

Empowered lives.Resilient nations.

KOSOVO REMITTANCE STUDY

2012

July 2012

4

Koso

vo R

emitt

ance

Stu

dy 2

012

5

Koso

vo R

emitt

ance

Stu

dy 2

012

Foreword

It is widely recognized that the Kosovo econo-my relies heavily on remittance flows from mi-grants living in the Diaspora. However, actual data and analysis on the degree of influence and impact that remittances have has been scarce. This Kosovo Remittance Study (KRS) 2012 sheds light on the flow, use, and impact of migration and remittances on the Kosovo economy and on the people of Kosovo. The Study is based on a survey of remittances con-ducted during the summer of 2011, a peak period when many senders of remittances visit Kosovo to unite with remittance recipi-ents. The 2011 survey was designed in close cooperation with all key national stakehold-ers, including the Central Bank of Kosovo, the Ministries of Finance and Economic De-velopment, the Kosovo Agency of Statistics, as well as the International Monetary Fund, which contributed in a crucial advisory role. Compared to the first remittance survey, which was undertaken by UNDP in 2010, the sample of the 2011 survey was doubled to 8,000 households. A further 700 interviews were conducted with migrants living abroad who were identified through random sam-pling of their household members living in Kosovo. Together, the 2011 survey and this 2012 Study constitute a rich data resource al-lowing for new and more in-depth analysis. A striking finding is that, contrary to public perception, there was a 14% decline in remit-tance inflows to Kosovo in 2011 compared to 2010 – representing a steep decline that comes in the midst of the ongoing European debt cri-sis. Still, dependency on remittances in Koso-vo remains substantial – with 25 per cent of households reporting reliance on remittances, a figure that is even higher among households in rural areas and those headed by women.

The dependence on remittances as a par-amount livelihood strategy is under-scored by the finding that remittances represent the second largest source of income for remittance-receiving households. Migrant expenditures during visits to Kosovo stand out as the greatest share of total remit-tance inflows, compared to cash and in-kind remittance transfers. Remittance use is over-whelmingly geared toward basic consump-tion among recipients, with more than 90% spent on basic items such as food, clothing, housing, durable goods, health and educa-tion. Crucially, there is evidence that remit-tances negatively affect recipient labour sup-ply – namely that willingness to work is lesser, especially among female heads of household. The number of migrants who report about converting their received remittances into income or employment-generating activi-ties is very small, while a staggering 60 per cent report having purchased real estate. Such findings provide food for thought for pol-icy making and will be of great use to the Cen-tral Bank of Kosovo and other decision-makers. The 2012 Study concludes with a set of recom-mendations. One immediate recommendation is for the need to further research the educa-tion attainment and especially professional/occupational profiles of emigrants in order to assess knowledge and skill transfer potential. Further and ongoing research is also needed on the impact of remittances on recipients’ human development and willingness to work, especially by studying this over time. A third area of further research is recommended to better understand reasons for limited invest-ment by the Kosovan Diaspora and to better study potential sectors where they might in-vest in the future.

Foreword

6

Koso

vo R

emitt

ance

Stu

dy 2

012

Foreword

Further policy recommendations relate to the work of the Kosovo government to de-velop concrete incentives for investments by the Kosovo Diaspora, including promot-ing migrant-focused Public Private Part-nership platforms; assistance on the design of viable business plans; simplification of business start-up procedures; and so forth. Other recommendations call on the bank-ing sector to explore the creation of special products that would encourage the trans-fer of remittances through formal channels. UNDP commitment to facilitate the conver-sion of remittances into development benefits for Kosovo extends beyond the Kosovo Re-mittance Study 2012. The launch of the Study coincides with the inception of a new project, implemented in cooperation with the Interna-tional Organization for Migration (IOM) and with the generous support of the Government of Finland, that will promote accumulation of savings and investment by increasing access to and literacy on financial services; establishing pilot mechanisms to facilitate migrants’ sav-ings and investment to Kosovo; and improv-ing capacity of Kosovan institutions to develop evidence-based policies related to migration and development.

Osnat Lubrani

UN Development Coordinator

UNDP Resident Representative

7

Koso

vo R

emitt

ance

Stu

dy 2

012

Acknowledgments

Acknowledgments

Authors: Erëblina Elezaj, Leading Research Analyst, UNDP Kosovo Faton Bislimi, Research Analyst Iris Duri, Statistician, UNDP Kosovo

UNDP Project Team: Ulla-Maija Rantapuska, Programme Analyst Anton Selitaj, Project Support

Quality Assurance:

Mytaher Haskuka, Head of Policy, Research, Gender and Communication team, UNDP Kosovo Artan Loxha, Portfolio Manager, UNDP Kosovo Ada Shima, Junior Analyst, UNDP Kosovo Brikena Sylejmani, Gender Programme Associate, UNDP Kosovo

Members of Remittance Survey Steering Group:

Jose Sulemane, IMF Resident Representative Arbër Domi, IMF Economist Selim Thaçi, IMF Economist Gani Gërguri, Central Bank of Kosovo, Governor Arben Mustafa, Central Bank of Kosovo, Director of Economic Analysis Sokol Havolli, Central Bank of Kosovo, Senior Economist Valmira Rexhëbeqaj, Ministry of Finance, Macroeconomic Adviser Arbnor Kastrati, Ministry of Economic Development, Adviser of Minister Lulëzim Dragusha, Ministry of Diaspora, Political Adviser of Minister

UNDP Bratislava Regional Centre Support Group:

Alessandra Bravi, Economist, Office of the Senior Economist Alisher Juraev, Economist and Vulnerability Database Manager, Office of the Senior Economist Mihail Peleah, Human Development Programme and Research Officer Stephen Schmitt - Degenhardt, Policy Specialist (Private Sector Development)

8

Koso

vo R

emitt

ance

Stu

dy 2

012

Language proof readers:

Danijela Mitic, Communication Analyst, UNDP Kosovo Joshua Moldt, Intern, UNDP Kosovo

Data Collection: UBO Consulting

Albanian Translator: Besa Ismaili (Prishtinë/Priština, Kosovo)Serbian Translator: Besmir Fidahić (Prishtinë/Priština, Kosovo)

The analysis and conclusions of this Report are those of the authors and do not necessarily reflect the views of the United Nations Development Programme.

Acknowledgments

9

Koso

vo R

emitt

ance

Stu

dy 2

012

Abbreviations

Abbreviations

CBK Central Bank of Kosovo

CIS Commonwealth Independent States

ESI European Stability Initiative

EWS Early Warning System

FDI Foreign Direct Investments

FPL Food Poverty Line

FYR of Macedonia Former Yugoslav Republic of Macedonia

GDP Gross Domestic Product

HDR Human Development Report

IASCI International Agency for Source Country Information

IMF International Monetary Fund

IOM International Organization for Migration

KAS Kosovo Agency of Statistics

KHDR Kosovo Human Development Report

KRHS 2010 Kosovo Remittance Household Survey 2010

KRHS 2011 Kosovo Remittance Household Survey 2011

KRS 2010 Kosovo Remittance Study 2010

KRS 2012 Kosovo Remittance Study 2012

LFS Labour Force Survey

LSMS Living Standards Measurement Survey

MTA Money Transfer Agencies

NGO Non-governmental organization

OECD Organization for Economic Cooperation and Development

PES Public Employment Services

RAE Roma, Ashkali and Egyptian

10

Koso

vo R

emitt

ance

Stu

dy 2

012

Abbreviations

RIINVEST Riinvest Institute for Research and Development Kosovo

UNDP United Nations Development Programme

USD United States Dollar

VAT Value Added Tax

11

Koso

vo R

emitt

ance

Stu

dy 2

012

Content

Content

Foreword ...........................................................................................................................................................5 Acknowledgments .........................................................................................................................................7 Abbreviations ..................................................................................................................................................9 Executive Summary .................................................................................................................................... 17

CHAPTER 1: REMITTANCES IN CONTEXT ........................................................................................ 19 1.1 Remittances in grim growth perspectives .................................................................................. 19 1.2 Kosovo context ................................................................................................................................... 20 1.3 Remittances to Kosovo: A brief overview of latest trends ..................................................... 21 1.4 Impact of migration and remittances ........................................................................................... 22 1.4.1 Microeconomic impact of remittances .............................................................................. 22 1.4.2 Macroeconomic impact of remittances ............................................................................ 23 1.4.3 Social aspects and impacts of remittances ...................................................................... 23

CHAPTER 2: AN OVERVIEW OF MIGRATION IN KOSOVO ........................................................ 25 2.1. Key waves of emigration from Kosovo ........................................................................................ 25 2.2 Emigrants’ profile .................................................................................................................................. 27 2.3 Emigrants’ bond to Kosovo ............................................................................................................... 29 2.4 Kosovo’s migration outlook .............................................................................................................. 30

CHAPTER 3: USE OF REMITTANCES AND IMPACT ON HUMAN DEVELOPMENT OF RECIPIENTS................................................................................................................................................... 33 3.1 Basic characteristics of households .............................................................................................. 33 3.2 Household heads and adults in Kosovo: An overview of key characteristics ................. 34 3.3 Income and expenditures of Kosovan households ................................................................. 35 3.4 Distribution of households across income and expenditure quintiles ............................. 38 3.5 Use of remittances ............................................................................................................................... 40 3.6 Impact of remittances on human development ....................................................................... 41 CHAPTER 4: IMPACT OF REMITTANCES ON THE LABOUR SUPPLY OF RECIPIENTS .... 43 4.1 Employment status of household heads in Kosovo: An overview ..................................... 43 4.2 Impact of remittances on labour supply: Regression analysis ............................................. 47

12

Koso

vo R

emitt

ance

Stu

dy 2

012

Content

CHAPTER 5: EMIGRANTS’ INCOME, INVESTMENT AND SAVINGS BEHAVIOUR: POTENTIAL FOR DEVELOPMENT ........................................................................................................ 49 5.1 Remittance flows to Kosovo ............................................................................................................. 49 5.2 Remittance transfer channels .......................................................................................................... 51 5.3 Emigrants’ investment and savings behavior............................................................................. 53 5.4 Determinants of remitters’ investments in Kosovo .................................................................. 56 5.5 Remitter’ savings: Potential for Kosovo? ..................................................................................... 56 CHAPTER 6: RECOMMENDATIONS .................................................................................................... 57 REFERENCES ................................................................................................................................................ 61 APPENDIX I: SUMMARY OF RESULTS .............................................................................................. 65 APPENDIX II: TECHNICAL NOTE ON DEFINITION OF EMIGRANTS ...................................... 74 APPENDIX III: SURVEY METHODOLOGY ......................................................................................... 75 Background and objectives ..................................................................................................................... 75 Sampling ........................................................................................................................................................ 75 The questionnaire ....................................................................................................................................... 75

Figures

13

Koso

vo R

emitt

ance

Stu

dy 2

012

Figures

CHAPTER 1: REMITTANCES IN CONTEXT ........................................................................................ 19 Figure 1.1 GDP per capita (current US$) for Kosovo and its neighbours, 2000-2010 ......... 20 Figure 1.2 Remittance inflows to Kosovo 2005-2010, in million € ............................................. 21

CHAPTER 2: AN OVERVIEW OF MIGRATION IN KOSOVO ........................................................ 25 Figure 2.1 Emigrants’ education level across emigration waves ................................................ 26 Figure 2.2 Emigrants’ residence locale by emigration waves ...................................................... 27 Figure 2.3 Gender composition of emigrants, as reported by their families in Kosovo ..... 27 Figure 2.4 Education level of emigrant and Kosovan household heads, by gender ........... 28 Figure 2.5 Employment status of emigrant household heads, by gende ............................... 29 Figure 2.6 Share of emigrants with family members and relatives residing in Kosovo ..... 30 Figure 2.7 Share of respondents with plans to migrate, by gender, ethnicity, residence, region, and receipt of remittances ........................................................................................................ 31

CHAPTER 3: USE OF REMITTANCES AND IMPACT ON HUMAN DEVELOPMENT OF RECIPIENTS................................................................................................................................................... 33 Figure 3.1 Remittance receipt, by ethnicity ....................................................................................... 33 Figure 3.2 Distribution of recipient households across regions, 2010 and 2011 ................. 34 Figure 3.3 Average education attainment of adults in Kosovo by gender and receipt of remittances, in years .................................................................................................................................. 35 Figure 3.4 Recipient households’ main sources of income, mean ratios ................................. 36 Figure 3.5 Non-recipient households’ main sources of income, mean ratioss ...................... 37 Figure 3.6 Top expenditure categories of Kosovan households ................................................ 37 Figure 3.7 Distribution of household expenditure across categories, mean ratios............. 38 Figure 3.8 Distribution of households across income (including remittances) quintiles, by receipt of remittances .......................................................................................................................... 38 Figure 3.9 Distribution of remittance recipient households across income (with and without remittances) quintiles ........................................................................................... 39 Figure 3.10 Distribution of households across expenditure quintiles, by receipt of remittances .................................................................................................................................................... 39 Figure 3.11 Distribution of remittances across consumption categories, mean shares .... 40

Figures

14

Koso

vo R

emitt

ance

Stu

dy 2

012

CHAPTER 4: IMPACT OF REMITTANCES ON THE LABOUR SUPPLY OF RECIPIENTS .... 43 Figure 4.1 Percentage of employed household heads, by gender and receipt of remittances .................................................................................................................................................... 44 Figure 4.2 Percentage of unemployed household heads, by gender and receipt of remittances .................................................................................................................................................... 45 Figure 4.3 Employment of adult household members, by gender and receipt of remittances .................................................................................................................................................... 45

Figure 4.4 Minimum reservation wages, by remittance receipt ................................................. 46

CHAPTER 5: EMIGRANTS’ INCOME, INVESTMENT AND SAVINGS BEHAVIOUR: POTENTIAL FOR DEVELOPMENT ........................................................................................................ 49 Figure 5.1 Distribution of in-kind remittances by type .................................................................. 49 Figure 5.2 Reason for sending remittances to Kosovo ................................................................... 50 Figure 5.3 Remittance transfer channels, 2010 and 2011 ............................................................. 51 Figure 5.4 Reasons for not using formal transfer channels, ranked by importance (low, neutral, high) ...................................................................................................................................... 52 Figure 5.5 Transfer channel preferences ............................................................................................. 53 Figure 5.6 Remitters’ key investment areas in Kosovo ................................................................... 54 Figure 5.7 Remitters` main reasons to invest in Kosovo, by level of importance ................. 55

APPENDIX I: SUMMARY OF RESULTS .............................................................................................. 65 Figure A1: Outlook for remittance flows to developing countries, 2011-13 .......................... 65 Figure A2 Remittance receipt, by locale of residence .................................................................... 65

Tables

15

Koso

vo R

emitt

ance

Stu

dy 2

012

CHAPTER 1: REMITTANCES IN CONTEXT ........................................................................................ 19 Table 1.1 Remittance inflows to Kosovo, 2010 and 2011 .............................................................. 22

CHAPTER 2: AN OVERVIEW OF MIGRATION IN KOSOVO ........................................................ 25 Table 2.1 Share of emigrants across emigration waves ................................................................. 26 Table 2.2 Average age of emigrant and Kosovan household heads ......................................... 27 Table 2.3 Average years of education completed, by gender and residence ........................ 28 Table 2.4 Emigrants’ frequency of visits to Kosovo.......................................................................... 30

CHAPTER 3: USE OF REMITTANCES AND IMPACT ON HUMAN DEVELOPMENT OF RECIPIENTS................................................................................................................................................... 32 Table 3.1 Characteristics of household heads, by receipt of remittances ............................... 34 Table 3.2 Mean household income including and excluding remittances, by receipt of remittances .................................................................................................................................................... 35 Table 3.3 Mean household expenditure, by receipt of remittances ......................................... 37

C HAPTER 5: EMIGRANTS’ INCOME, INVESTMENT AND SAVINGS BEHAVIOUR: POTENTIAL FOR DEVELOPMENT ........................................................................................................ 47 Table 5.1 Emigrants’ average expenditures during visits to Kosovo, by visit frequency .... 50 Table 5.2 Remittance transfer channels, by gender of emigrant ............................................... 51 Table 5.3 Recipients’ possession of a bank account, by gender of household head .......... 52 Table 5.4 Remitters’ monthly average household income, by income intervals .................. 53 Table 5.5 Remitters’ share of income sent to Kosovo ..................................................................... 54 Table 5.6 Remitters’ share of income saved and invested in Kosovo ........................................ 54

Tables

Tables

16

Koso

vo R

emitt

ance

Stu

dy 2

012

APPENDIX I: SUMMARY OF RESULTS .............................................................................................. 65 Table A1 Emigrant destination countries ........................................................................................... 66 Table A2 Marital status of emigrant and Kosovan household heads ....................................... 66 Table A3 Education of emigrant and Kosovan household heads .............................................. 67 Table A4 Employment sector of emigrant household heads, by gender ............................... 67 Table A5 Frequency of remittance transfers, as reported by recipients and senders ......... 67 Table A6 Emigrants’ length of stay in Kosovo during visits .......................................................... 68 Table A7 Correlation analysis of individual and household variables with household heads’ plans to migrate in the near future ......................................................................................... 68 Table A8 Determinants of household heads’ plans to migrate ................................................... 69 Table A9 Relationship between recipient household heads and remitters ........................... 69 Table A10 Household income sources, mean ratios ....................................................................... 70 Table A11 Household expenditures across categories, mean ratios ........................................ 70 Table A12 Use of remittances across consumption categories, mean ratios ......................... 71 Table A13 Households’ satisfaction with the socio-economic situation of their families ............................................................................................................................................................ 71 Table A14 Employment sector of household heads, by receipt of remittances ................... 71 Table A15 Household heads’ major reasons for not seeking work, by remittance receipt .............................................................................................................................................................. 72 Table A16 Correlation analysis of individual and household variables with inactive working age household members ........................................................................................................ 72 Table A17 Impact of remittance receipt on unemployed adults not looking for work (aged 15-64) .................................................................................................................................................. 73 Table A18 Determinants of remitters’ investments in Kosovo .................................................... 73

17

Koso

vo R

emitt

ance

Stu

dy 2

012

Executive Summary

Migration and remittances have made an enormous contribution to the Kosovan econ-omy since the 1960s. On a household level, they are considered a coping mechanism for the disadvantaged households lacking em-ployment and earning opportunities. More than one in every third household in Kosovo has a family member abroad, and one in every fourth receives remittances. On a macro level they have served as a major source of exter-nal finance, amounting to more than 11% of Kosovo’s GDP in 2010 (UNDP, 2010b, p.12).

UNDP’s Kosovo Remittance Study (KRS) 2010 provided an initial insight on the flow, use, and effects of remittances in Kosovo, es-pecially on expenditure patterns, reservation wages, and access to education and healthcare. The survey was repeated during the peak pe-riod of Diaspora visits to Kosovo, in July-Au-gust 2011, in order to conduct a more in-depth analysis of remittances’ impact on the welfare of recipients as well as identify their savings and investment potential. The survey inter-viewed 8,000 households residing in Kosovo and 656 of their members and relatives (and their households) living abroad.

Kosovo Remittance Household Survey (KRHS) 2011 data show that the total amount of remittance inflows to Kosovo reached €379.6 million in 2011, marking a 14% decline from 2010’s €442 million. Similar to 2010, em-igrants’ expenditures during visits to Kosovo comprise a higher share of total remittance inflows (€214.4 million) than cash and in-kind remittances sent to Kosovan households (€165.5 million).

The survey shows that 25% of households in Kosovo receive remittances. This figure is 5 percentage points higher than the data of KRS 2010 showed and higher for: households

residing in rural areas; regions of Pejë/Peć, Ferizaj/Uroševac and Gjilan/Gnjilane; house-holds of K-Albanians; and households headed by women. The data show that remittances are the second largest source of income for these households. They comprise more than 20% of their total household income: second only to earnings from permanent employment.

A fairly high share, 57.2%, of cash remit-tances are channelled to Kosovo through banks, credit/debit cards, Money Transfer Agencies (MTAs), and post offices. The re-maining 42.8% are brought in person by emigrants or their friends. This figure is sig-nificantly higher for women, at 58%. Although the transfer channels have been formalized since 2010, informal channels are still popular because of lower or no costs compared to the formal ones.

KRHS 2011 data show that remittances are mainly used for basic consumption. Recipi-ents spend more than 90.6% of remittances on food, clothing, housing, durable goods, and education and healthcare services. Compari-sons of remittance recipient and non-recipient households show that remittances have im-proved the livelihoods of recipients and may have also improved the earning opportunities of the younger family members with higher spending on human capital. Conversely, re-gression analysis shows that remittances nega-tively affect the labour supply of recipients. This is especially the case for female house-hold heads. They show higher rates of inactiv-ity both in terms of not seeking work when unemployed, and less frequently utilizing Public Employment Services (PES) compared to their non-recipient counterparts.

Recipient households report that they in-vest only 4% of remittances in business activi-ties, and save less than 4% of cash they receive on average. Moreover, only 5% of in-kind re-mittances received by households were in the form of productive assets (machinery, tractors,

Executive Summary

18

Koso

vo R

emitt

ance

Stu

dy 2

012

Executive Summary

etc), whereas 3% were in the form of land in-vestments in 2011. Although emigrants invest (20.4% on average) and save (18% on aver-age), high shares of their income, the number of emigrants investing and saving in Kosovo is fairly low. 35.7% of emigrants report to invest, whereas 20.4% report to save a portion of their income in Kosovo. The majority of emigrants who do invest in Kosovo do not channel their funds to income- or employment-generating activities. About 60% of emigrants report to have purchased real estate for personal use, whereas 23.3% and 5.6% report to have invest-ed in family businesses and establishment of service operations respectively in 2011.

The Kosovo Remittance Study (KRS) 2012 is structured as follows. The first part, Chapter 1 includes a brief overview of Kosovo’s mac-roeconomic context - including trend analysis of remittance inflows - and a brief literature review of migration and remittance impacts, which provides a framework for analyses in the subsequent chapters. Chapter 2 includes a comprehensive profile of Kosovan migrant base, which covers gender composition, age, employment and education level, and origin (urban/rural) of emigrants across the four major emigration waves. The last section of the chapter attempts to identify the key deter-minants of household heads’ plans to migrate through regression analysis. Chapter 3 makes inferences of remittances’ impact on human development by comparing the remittance re-cipient and non-recipient households in terms of education attainment of adult members and household income and expenditure patterns. Special attention is paid to the usage of remit-tances for human capital investments. Chap-ter 4 provides a detailed profile of the working age adults in Kosovo, and, using regression analysis, assesses the effect of remittances on the labour supply of recipients. Chapter 5 provides a thorough description of the main types of remittance flows to Kosovo, and tries to pinpoint potential development areas by ex-

ploring emigrants’ investment and savings be-haviour. Finally, the last chapter provides a list of key recommendations based on the find-ings of the report. Technical details on defi-nition and classification of migrants may be found on Appendix II whereas Appendix III provides details on the survey methodology.

It must be noted that, using year of mi-gration, household size, and family bonds to Kosovo as proxies to distinguish between mi-grant workers and emigrants showed that the majority of respondents surveyed abroad by the KRHS 2011 are emigrants. Since the num-ber of surveyed migrant workers in the dataset is too small to conduct any statistically robust analyses and comparisons between the two groups, this report focuses solely on emigrants in its analyses and recommendations.

Hereafter, the term recipient households or recipients refers to households that receive cash or in-kind remittances, and the term non-recipient households or non-recipients refers to households that do not receive any kind of remittances. The terms emigrants, re-mitters and senders refer to the same group of individuals, i.e. Kosovans settled abroad who send remittances back home, and will be used interchangeably. It must also be emphasized that comparisons of individual characteris-tics between recipients and non-recipients are conducted separately for household heads and other adult (aged 18 or above) household members. Finally, the term Diaspora tourism refers to fluxes of emigrants visiting Kosovo during winter and summer holiday seasons.

19

Koso

vo R

emitt

ance

Stu

dy 2

012

Chapter 1: Remittances in Context

Migration and remittances have histori-cally been a livelihood strategy for millions of socially and economically deprived world-wide. The number of migrants in 2010 reached 215 million, 3% of world’s population, while remittances flowing to developing countries reached $325 billion, approximating the figure of foreign direct investments (FDI) to these countries for the same year (World Bank, 2011a, p.ix). These figures might, however, underestimate the real magnitude of migra-tion and remittances. That is because both mi-gration and remittances are still highly char-acterized by informality, and these figures are derived from official records.

According to de Haas (2009) the macro and microeconomic impacts of remittances vary depending on the sending country’s context, migrant selectivity, and the recipient’s use of them. A common and very important feature of remittances in the human development context is their counter-cyclical nature: abil-ity to protect households in countries of ori-gin in times of economic recessions, political conflicts or natural disasters (de Haas, 2009, pp.24-26). This is especially the case for larger remittance recipients such as Kosovo, where they account for 11% of the GDP (UNDP, 2010b, p.12).

However, during global economic crises such as the present, heavy reliance on remit-tances may have detrimental impacts on the vulnerable groups instead of serving as a cushion. Economic slowdown in migrant host countries was instantaneously felt in migrant sending ones. For instance, in Albania, Bosnia and Herzegovina, Kosovo, and Serbia remit-

tance inflows measured in USD decreased by 12%, 11%, 4% and 15% respectively between 2009 and 2010 (UNDP Europe & CIS, 2011, p.3).1 In addition, the recuperation period for the region of Europe is predicted to be slower compared to others. World Bank’s “Outlook for Remittance Flows 2011-2013” forecasts that this region will reach its pre-crisis level of remittance inflows only in 2013 (See Figure A1 in Appendix I).

Considering the lack of research on the im-pact of remittances on human development in the region, especially in the crisis aftermath, this report seeks to fill in the evidence gaps to aid policy-making targeted at maximizing the development impact of migration and re-mittances in Kosovo. It focuses on multiple dimensions such as consumption and invest-ment behaviour of remittance recipients, their labour supply and savings and investment be-haviour of emigrants for a more comprehen-sive analysis.

1 According to the same paper of the UNDP Europe & CIS Office of the Senior Economist, the ratio of remittance inflows to GDP for Albania, Bosnia and Herzegovina, Kosovo and Serbia was 8%, 11%, 16% and 9% respectively in 2010. The ratios were calculated using central bank balance of payments data, which specifically accounts for “worker’s remittances” and “compensation of employees”. For GDP data, IMF’s April 2011 World Economic Outlook database figures were used (UNDP Europe & CIS, 2011, p.1).

CHAPTER 1: REMITTANCES IN CONTEXT1.1 Remittances in grim growth perspectives

20

Koso

vo R

emitt

ance

Stu

dy 2

012


Given Kosovo’s ongoing economic under-performance, it is perhaps no surprise that re-mittances have continued to serve as lifelines for many Kosovan households. Indeed, as we will discuss in the thematic chapters of this study, remittances have played a crucial role in helping a significant number of households meet their basic consumption needs. KRHS 2011 data show that they are a major source of income in Kosovo, second only to income from permanent employment.

In the post-conflict years, Kosovo has seen some economic progress, which has been mainly fuelled by foreign aid in the form of official development assistance and humani-tarian aid. While the international donor as-sistance for Kosovo has gradually decreased, from 45% of Kosovo’s general government revenues in 2004 to 20% in 2010 (KAS, 2011, p.6), remittances have been a more constant source of external financing, ranging between 11 and 16% of its GDP.2

2 The figure of remittance inflow/GDP ratio in Kosovo varies between 11% and 16% across different sources. Figures of the latest Monthly Statistics Bulletin (November 2009) of the Central Bank of Kosovo (CBK) yield a share of 12.4% of GDP for year 2010 (CBK, 2011a); the UNDP KRS 2010 reports that in 2010 remittances accounted for 11% of Kosovo’s GDP (UNDP, 2010b); the World Bank reports a share of 13% of GDP for year 2010 (World Bank, 2011b) whereas UNDP Europe & CIS, Office of the Senior Economist reports a share of 16% for the same year (UNDP Europe & CIS, 2011).

While Kosovo’s GDP and GDP per capita have seen continuous increases during the post-conflict period, Kosovo has recorded the low-est GDP per capita and the highest poverty and unemployment rates in the region (World Bank, 2012).3 The World Bank estimated that about 34.5% of Kosovo’s people lived in pover-ty in 20094, while Kosovo’s Agency of Statistics (KAS) reported an unemployment rate as high as 45.4% in 2009 (KAS, 2009, p.5)5.

3 According to the latest Word Bank World Development Indicators 2011, Koso-vo’s GDP per capita of $3,080.3 in 2010 was the lowest in the region, followed by that of Albania of $3,678.2, Former Yugoslav Republic (FYR) of Macedonia $4,425.1, Bosnia and Herzegovina $4,491.2, Serbia $5,365.5 and Montenegro $6,340.1 (http://data.worldbank.org/indicator).

4 According to the latest Word Bank World Development Indicators 2011, Bos-nia and Herzegovina has the highest poverty rate after Kosovo in the region 14.7% (2007), followed by Albania 12.4% (2008), Serbia 9.2% (2010) and Mon-tenegro 6.6% (2010) (http://data.worldbank.org/indicator).

5 According to the latest Word Bank World Development Indicators 2011, FYR of Macedonia has the highest unemployment rate in the region after Kosovo 32.2% (2009), followed by Bosnia and Herzegovina 23.9% (2008); Serbia 16.6% (2009) and Albania 12.7% (2008) (http://data.worldbank.org/indicator).

1.2 Kosovo context

Montenegro

Serbia

Bosnia and HerzegovinaMacedonia, FYR

Albania

Kosovo

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010$0

$1,000

$2,000

$3,000

$4,000

$5,000

$6,000

$7,000

Figure 1.1 GDP per capita (current US$) for Kosovo and its neighbours, 2000-2010

Source: World Bank. World Development Indicators 2012

21

Koso

vo R

emitt

ance

Stu

dy 2

012


Despite their decline from 17.5% of GDP in 2004 to 13% of GDP in 20106 (World Bank, 2011b), remittances have been vital for Koso-vo’s economy and thousands of livelihoods since the 1960s. KRHS 2011 data show that a quarter, 25% of Kosovan households receives remittances.

1.3 Remittances to Kosovo: A brief overview of latest trends

The latest trend analysis of formal cash remittances sent to Kosovo published in the Monthly Statistical Bulletin of the Central Bank of Kosovo (CBK) show that they are slowly picking up after a notable decline from €535.4 to €505.6 million due to global financial crisis (CBK, 2011a, p.11).

6 Recall from footnote 2 that the estimates for the figure for year 2010 range between 11% and 16% of GDP.

The amount of remittances reached the figure of €393.3 million at the end of Septem-ber 2011, recording an annual growth of 4.9% (CBK, 2011b, p.15).

The figure of total remittances, using data reported by households in the KRHS 2011, shows a more pessimistic trend in inflows between 2010 and 2011. Using the average amount of cash and in-kind remittances7 as reported by senders and recipients at €2,136 per household per year and annual expendi-ture of €2,353 per emigrant household per year8 during their visits to Kosovo, the survey finds that the total amount of remittances for 2011 was €379.6 million. This figure marks a 14% decline in total amount of remittances from 2010, which was €442 million accord-ing to Kosovo Remittance Household Survey (KRHS) 20109. Similar to 2010, emigrant ex-penditures comprise a higher share of total remittance inflows than cash and in-kind re-mittances: €214.1 million compared to €165.5 million respectively. As may be noted in the table below, the decline in the total amount of remittances is mainly attributed to the de-cline in the annual amount of cash and in-kind remittances transferred to households in Kosovo, which decreased by around 36% over the two years, from €3,331 to €2,136 on aver-age per household . The inflow of remittances through Diaspora tourism has declined by 8%, possibly (and partially) influenced by the de-crease in the number of emigrants that visit Kosovo at least once per year, from 94.1% to 91% in 2011.7 The survey asked the respondents to provide estimated values of in-kind remittances they receive from family members and relatives abroad.

8 The average amount of yearly emigrant expenditures in Kosovo was calculated using average amounts of expenditures across fre-quency of visits per year.

9 The estimated figure of total remittance inflows by KRHS 2011 may be lower than the official CBK estimate because of differences in methodology of calculation. However, this figure provides a good approximation in terms of trend analysis, highlighting the fact that reported remittances have decreased compared to the 2010 survey.

Source: CBK’s Monthly Statistics Bulletin of Novem-ber 2011

Figure 1.2 Remittance inflows to Kosovo 2005-2010, in million €

418

467.1515.6

535.4

505.6

511.6

0

100

200

300

400

500

600

2005 2006 2007 2008 2009 2010

Remittance in�ows, in million €


418

467.1515.6

535.4

505.6

511.6

0

100

200

300

400

500

600

2005 2006 2007 2008 2009 2010



22

Koso

vo R

emitt

ance

Stu

dy 2

012


1.4 Impact of migration and remittances

As stated in the previous section, the im-pact of migration and remittances on develop-ment largely depends on the sending country’s context, migration selectivity and the recipient’s use of them (de Haas, 2009, pp.24-26). Ahoure (2008) adds another very important component to this list: the dependency on local (origin coun-try’s) institutional structures. Using longitudinal data analysis to identify the determinants of GDP growth in Sub-Saharan Africa over years, the author found that remittances had a negative impact in recipient countries with poor govern-ment structures (Ahoure, 2008). 1.4.1 Microeconomic impact of remittances

The poverty-reduction role of remittances depends on recipients’ pre-remittance income levels and profile of migrants. In countries with high poverty whereby the poor migrate and send remittances back home to secure survival of their households, remittances have proven to alleviate poverty among recipient households. 10

10 In two separate studies on Guatemala and Ghana, Adams finds that internal and international remittances reduce poverty level, depth and severity in both countries (Adams 2004; Adams 2006). Shroff (2009) finds the same effects in Mexico, but in this country’s case, internal remittances have a higher poverty-reduction role com-pared to international ones (Shroff, 2009). Gupta, Pattilo & Wagh (2008) find that remittances have a poverty-mitigating effect and promote financial development in Sub-Saharan Africa (Gupta, Pat-tilo, & Wagh, 2008). Yang & Martinez (2005) find that in addition to alleviating poverty among recipients in the Philippines, remittances have had spillover effects on non-recipient households as a result of appreciation of migrants’ currency due to the 1997 Asian financial crisis (Yang & Martinez, 2005).

However, remittances may increase income inequality in regions where migration is more costly because migrant networks are less ac-cessible and can be afforded only by the better-off households. 11

Remittances´ impact on human develop-ment also depends on the use of remittances by recipient households. Regardless of the aforementioned, remittances undoubtedly im-prove the livelihoods of the recipients. Both de Haas (2009) & Yang (2009) provide extensive literature reviews with findings on positive impact of remittances on health, nutrition, education, improved housing conditions and entrepreneurship activities of recipient house-holds (de Haas 2009; Yang 2009). Investments on human capital in particular imply that re-mittances may have a positive impact on sus-tainable human development as they improve the earning prospect of children in the future. However, as a stable source of income, remit-tances may create dependency and negatively impact the labour supply of recipients.

11 Adams (1991) finds that remittances had a negative impact on rural income distribution in Egypt in both gross and per capita terms as they were earned by top income quintile villagers (Adams, 1991). Similarly, using a no-migration counterfactual for a sample of households in Bluefields, Nicaragua, Barham&Boucher (1995) find that migration and remittances increase income inequality (Barham&Boucher, 1995). Taylor, Mora, Adams & Lopez-Feldman (2005) find that migration and remittances initially have an inequality-increasing effect in rural Mexico, however, they serve as an equalizer with migration expansion (Taylor, Mora, Adams & Lopez-Feldman, 2005).

Table 1.1 Remittance inflows to Kosovo, 2010 and 2011

Average cash and in-kind re-

mittances

Average emi-grant expendi-

tures

Total cash and in-kind remit-

tances

Total emigrant expenditures

Total annual remittance in-

flows

KRHS (2010) €3,331 €2,757 €182.7million €259.3million €442 million

KRHS (2011) €2,136 €2,352 €165.5million €214.1million €379.6million

23

Koso

vo R

emitt

ance

Stu

dy 2

012


1.4.2 Macroeconomic impact of remittances

A recipient country’s context is also very important for the macroeconomic impact of remittances. However, regardless of context, most of the studies and reports commonly rec-ognize remittances to have a multiplier effect - through increased level of recipient house-holds’ income or Diaspora tourism. Moreover, their role as a major source of external finance is considered highly beneficial for a number of countries.

Regardless of the earned income of re-cipients or profile of migrants, remittances increase the gross income level of recipients, which increases the demand for consumption of products and services, resulting in a rise in demand for local labour. In other words, the multiplier effect of remittances in recipient countries may stimulate economic growth. The effect may be weaker in countries that mainly rely on imports. Kosovo is such an example with imports accounting for 62% of GDP (World Bank, 2012). But increased de-mand for imports may increase governments’ revenues through higher levels of value added tax (VAT) or other import taxes.

In countries with high unemployment rates such as Kosovo, migration reduces the pres-sure on the labour market and may even alle-viate fiscal pressure on the government. Since poverty is strongly correlated with unem-ployment and migration has been a solution to unemployment since as early as the 1960s, remittances have been serving as an informal network for vulnerable households. Moreover, by reducing the number of the unemployed in the labour market and increasing recipient households´ income level, remittances may boost the reservation wage in the market. In this way, remittances may also benefit non-recipient individuals.

1.4.3 Social aspects and impacts of remittances

In addition to cash and in-kind remittanc-es, migrants also remit ideas, behaviours, and social capital to their countries of origin, or so-called “social remittances” (Levitt, 1998). Con-tingent on investment climate and conditions, this knowledge and technology transfer to re-cipients may enhance their entrepreneurship skills and increase their propensity to invest in such activities.12 Continuous interaction with international migrants has also been found to increase the support for democratic processes in the migrant source countries (Cordova & Hiskey, 2009).

The global Human Development Report (HDR) 2009 on Migration and Mobility dis-cusses yet another very important aspect of migration and remittances: gender. According to the report, the change in the migrant base around the world, that is, increase in the share of women, may change traditional roles, espe-cially with regard to caregiving duties of chil-dren and elderly, as the women move. When men emigrate, several studies have found that remittances have strengthened women’s po-sition in the household and enhanced their emancipation, including participation in com-munity-level activities. In other cases, women’s position in the family was exacerbated as their duties and responsibilities increased but their decision-making power was limited until their spouse’s return, or taken over by parents in law (UNDP, 2009, p.77).

12 In his literature review of the impact of migration and remit-tances on different categories of investments, Yang (2009) finds that they are positively correlated with entrepreneurship activities, investments in small businesses and agricultural land (Yang, 2009, p. 7).

24

Koso

vo R

emitt

ance

Stu

dy 2

012

25

Koso

vo R

emitt

ance

Stu

dy 2

012

Chapter 2: An Overview of Migration in Kosovo

Although Kosovo has been a source of mi-grants since the beginning of the 20th century, the exact number of them remains unknown. It is usually reported as a range, using figures from different estimation methods. Recently, the number of Kosovan emigrants residing abroad was estimated to be between 220,000 and 500,000.13 This report uses the figure of 400,000 emigrants in its calculations, as it is believed to be the most proximal to reality and recent estimate.

As in numerous developing countries, mi-gration has been a response to the dire liv-ing conditions due to high unemployment in Kosovo, which is especially high in rural ar-eas.14 Therefore, the initial migrant base was comprised of young, largely undereducated and unskilled men from rural areas who mi-grated to Western European countries (mainly Germany and Switzerland) to work as guest workers in order to support their families in Kosovo. A slight change in the migrant base occurred around the end of 1980s, as more educated and skilled youngsters left Kosovo. Again the base changed slightly after 1999, as families that were left behind started to join

13 Using Riinvest Household Surveys 2001 and 2007, this research institute estimates the number of emigrant households to be around 105,000 whereas the number of Kosovan emigrants is approximately 315,000 (Riinvest, 2007). The International Monetary Fund (IMF) estimated a figure of 220,000 Kosovan emigrants in 2003, using the Population Census for 1981 and population growth rate of 2% (IMF, 2004). Finally, using census data of Organization for Economic Cooperation and Development (OECD) host countries, Docquier and Marfouk (2007) estimate the number of emigrants from Kosovo, Montenegro, and Serbia to be two million in total, of whom 400,000 are Kosovan (Docquier & Marfouk, 2007).

14 In its assessment of reintegration needs of returned migrants from the Western Balkans, the International Organization for Migration (IOM) (2004) also attempted to determine the factors that pushed individuals to migrate to their host countries. The survey data showed that Kosovan respondents had the second highest rate of unemployment prior to departure at 62.1% and experienced the most long-term unemployment (five to ten years) at 5.8% (IOM, 2004).

their emigrant family members in their host countries. The section below provides a com-prehensive migration profile for Kosovo, using existing literature and data from the KRHS 2011.

2.1. Key waves of emigration from Kosovo

Literature on Kosovo migration (Riinvest 2007; Vathi&Black, 2007; ESI, 2006; IOM, 2004) distinguishes four emigration waves in Kosovo:

o Late 1960s - early 1970s: Unskilled young men with little education from rural Koso-vo emigrate to Germany and Switzerland as guest workers. The flow decreases briefly in the 1970s when new jobs are created in the public administration institutions and so-cially owned enterprises;

o 1989 - 1997: Kosovo’s autonomy is abol-ished, and a mass dismissal of Kosovan Albanians from their jobs follows. More skilled and better educated young men from both rural and urban areas migrate to West-ern European countries to find jobs and es-cape the Yugoslav military service;

o 1998-1999: Nearly a million of Kosovan Albanians are forcefully displaced from Kosovo during the conflict. The largest num-ber of these individuals flees to neighbour-ing countries as refugees or other countries as asylum seekers. This trend reverses im-mediately after the conflict when a massive return of displaced population occurs;

o Post 1999: As political stability is estab-lished in Kosovo, the immigration policies in (especially) Western European countries

CHAPTER 2: AN OVERVIEW OF MIGRATION IN KOSOVO

26

Koso

vo R

emitt

ance

Stu

dy 2

012

are straitened towards Kosovans. The emi-gration wave mainly consists of: 1) migra-tion for family reunification purposes; 2) illegal migration of unskilled and under-educated youth and 3) (temporary) legal migration of highly skilled and highly edu-cated individuals through study or work ar-rangements.

Grouping the migrant data of the KRHS 2011 by the above-listed emigration waves, the table below shows that the largest share of Kosovan emigrant household heads, 53.6%, emigrated after the conflict. The second larg-est share, 25%, emigrated between 1989 and 1997.

As mentioned earlier in the literature re-view, Germany and Switzerland were and remain the top two host countries of Koso-van emigrants, hosting 31.3% and 27.9% of all Kosovan emigrants respectively. Italy and Austria also host a considerable percentage of Kosovan emigrants, hosting 7.1% and 6.8% re-spectively (See Table A1 in Appendix I).

The KRHS 2011 data also show the shift in the emigrants’ profile across emigration waves in terms of education and residence locale. As may be observed on Figure 2.1 below, more than 90% of emigrant household heads who left Kosovo before year 1989 had completed at least primary or secondary education while only 6.4% had not completed primary educa-tion.

The share of emigrant household heads that have not completed primary education or secondary education has decreased since the first wave of emigration. The number of those who do not have any education has dropped to nearly zero in the last two waves while the percentage of those with only primary educa-tion has decreased to 17%.

Table 2.1 Share of emigrants across emigration waves

Emigration wave Percentage of emigrants

I. Pre-1989 8.8%

II. 1989-1997 25.0%

III. 1998-1999 12.6%

IV. Post 1999 53.6%

Total 100%

Figure 2.2 shows that the predominance of rural areas as the source of emigrants expe-rienced a drastic decrease during the second wave of emigration, upon mass dismissal of Kosovan Albanians from their jobs. The share of emigrants from urban areas has slowly but steadily increased since that year, reaching 46.8% of the emigrant base in the post 1999 wave.

0%

10%

20%

30%

40%

50%

60%

70%

80%

6.4% 0.7% 0.9%

45.2%

19% 18.3%16.9%

46%

70.3% 69.9% 70.5%

2.3%

10.1% 11.8% 11.5%

I. Pre - 1989 II. 1989 - 1997 III. 1998 - 1999 IV. Post - 1999

Did not complete primary education

Primary education

Secondary education

University or higher education

Figure 2.1 Emigrants’ education level across emigration waves


27

Koso

vo R

emitt

ance

Stu

dy 2

012

Figure 2.2 Emigrants’ residence locale by emigration waves

2.2 Emigrants’ profile

The average emigrant household head is approximately 40 years old, married employed in the private sector, and living in a household with 3 other members.

The gender composition and marital status of emigrant household heads is similar to that of the rest of Kosovan household heads: 86.5% of emigrant households are headed by men, whereas 13.5% by women compared to 85.4% and 14.6% of households headed by men and women respectively for all of Kosovo. Simi-larly, 85.1% of emigrant household heads are married compared to 87.6% of their counter-parts in Kosovo (See Table A2 in Appendix I for more details on the marital status of re-spondents).

The gender composition of the emigrant base, as reported by emigrants’ families in Kosovo15, is still dominated by men. 67.5% of all emigrants are reported to be men/boys and the remaining 32.5% women/girls, compared to shares of 51.8% and 48.2% of men and women in Kosovo respectively.

15 The survey asked respondents living in Kosovo to provide the following information on their emigrant household members: relationship to the respondent, gender, age, years of education and employment status.

There is an 8-year difference in the average age of household heads in Kosovo and those living abroad. Particularly, female household heads in Kosovo are more than 11 years older than their emigrant counterparts. These differences are logical bearing in mind that: 1) The ma-jority of Kosovans migrated when young (as discussed on the literature review on migra-tion in Kosovo in the previous section) and 2) Kosovan households are still traditionally headed by men unless he is deceased or has migrated16.

Table 2.2 Average age of emigrant and Kosovan household heads

Household head Emigrants Kosovan residents

Men 39.9 47.5

Women 40.0 51.3

Total 40.0 48.0

The difference in education between emi-grant and Kosovan household heads is fairly substantial. As Table A3 in Appendix I shows, higher shares of Kosovan household heads have completed primary, secondary, and uni-versity education compared to their emigrant counterparts. However, when disaggregating these figures by gender, as in Figure 2.4 below, other differences are notable.

16 About 30% of female household heads in Kosovo are widowed, 9.4% are not married, and 3.3% are divorced.

72.9%59.2% 57.8%

53.3%

27.1%40.9% 42.2%

46.8%

0%

10%

20%

30%

40%

50%

60%

70%

80%

I. Pre-1989 II. 1989-1997 III. 1998-1999 IV. Post-1999

Rural

Urban

Note: Residence denotes the residence of recipient households.

67.5%

32.5%

Men / Boys

Women / Girls

Figure 2.3 Gender composition of emigrants, as reported by their families in Kosovo


28

Koso

vo R

emitt

ance

Stu

dy 2

012

According to KRHS 2011, 19% of female household heads in Kosovo have not complet-ed primary education: three times the figure of Kosovan men and almost five times the fig-ure of emigrant women. Another very inter-esting figure is the high share, 19%, of female emigrant household heads with university or higher education compared to emigrant men (9.1%) and household heads residing in Koso-vo.

Similar but smaller differences have been noted in the education of the emigrant base in general, confirming that the main reason for emigration from Kosovo remains the pursuit of employment rather than education. As the table below shows, Kosovan men have slightly higher education compared to emigrant men, whereas the opposite is true for women. Emi-grant women report to have completed 0.3 more years of education on average compared to Kosovan women. KRHS 2011 data also re-veal that the gap in education between men and women is higher among those in Kosovo than emigrants. Adult women in Kosovo com-plete, on average, one less year of education than men.

Table 2.3 Average years of education complet-ed, by gender and residence

Emigrants Kosovan residentsMen 11.7 11.9Women 11.2 10.9All 11.5 11.4

As the graph below shows, the majority of emigrant household heads are employed in the host country. The share of employed emi-grant male household heads is 95.4% while the share of employed emigrant female household heads is 84.4%. When disaggregating these fig-ures by employment sector, KRHS 2011 shows that the majority of emigrant household heads are employees in the private sector, 68.6%, fol-lowed by the public sector, 18.9%. The private sector employs a higher share of men than women, whereas the opposite is the case for the public sector (See Table A4 in Appendix I). Only about 4.3% of emigrant household heads are unemployed, and less than 2% are either retired or housewives/housemen. Emigrant household heads report that, on average, one member of their household is a jobseeker.

Note: Figures for adults, individuals aged 18 or above

0% 10% 20% 30% 40% 50% 60% 70% 80%

Emigrant men

Kosovan men

Emigrant women

Kosovan women

0.6%

5.4%

4.4%

18.8%

19.7%

16.3%

18.9%

31.7%

70.6%

69.1%

57.6%

42.4%

9.1%

7.1%

19.1%

7.2%

University or higher

Secondary education

Primary education

Not completed primary education

Figure 2.4 Education level of emigrant and Kosovan household heads, by gender


29

Koso

vo R

emitt

ance

Stu

dy 2

012

2.3 Emigrants’ bond to Kosovo

Kosovan emigrants have maintained close ties with their families in Kosovo regardless of the time spent in the host country. KRHS 2011 data show that about 37% of Kosovan households have family members abroad. 25% receive remittances, which is 5 percentage points higher than reported by KRS 2010. This is a rather interesting phenomenon bearing in mind that most emigrants live with their nuclear family in the host country. Very few (0.3%) emigrant household heads reported that their husband lives in Kosovo, and less than 3% reported that their wife lives in Koso-vo. The figures for sons and daughters residing in Kosovo were 3.2% and 1.7% respectively.

As the emigrant families are fully “settled” in the host countries (with time), the extended relationship with households in Kosovo could result in decline of remittances17.

These close ties to Kosovan residents have been mainly maintained through regular remittance transfers and frequent visits of emigrants to their homeland. Almost 72% of emigrants claimed to transfer remittances to their family members in Kosovo several times during the year. 26.4% reported they send re-mittances monthly, 25.5% quarterly, and 20% twice per year (See Table A5 in Appendix I). In addition, more than half of the emigrants, 57.1%, reported to visit Kosovo once a year, and 35.6% visit more than once a year.

17 Using data of the Riinvest Migrant Survey 2006, Havolli (2010) assesses the correlation of age, income, gender, education level, marital status, perception of the business environment, family ties to Kosovo, distance to home country, number of dependents in the home country, location, and years since migration with amount of remittances transferred by migrants. Having a close family tie was found to be positively correlated and statistically significant with the amount of remittances transferred by migrants (Havolli, 2010, p.11).

0%10%20%30%40%50%60%70%80%90%

100%

Emigrant men Emigrant women All emigrants

95.4%84.4%

93.8%

3.4%9.7% 4.3%

1.2% 5.9% 1.9%

Employed

Unemployed

Others

Note: Others in the graph refers to retirees and housewives/housemen

Figure 2.5 Employment status of emigrant household heads, by gender


30

Koso

vo R

emitt

ance

Stu

dy 2

012

During their visits to Kosovo a majority, 95%, of emigrants stay between two weeks and a month (See Table A6 in Appendix I), with each household spending on average €2,352 per year. This Diaspora tourism fuels econom-ic growth.

Table 2.4 Emigrants’ frequency of visits to Kosovo

Frequency of visits to Kosovo Percentage of emigrants

Less than once a year 7.3%Once a year 57.1%Twice a year 26.3%Three to four times a year 5.5%Several times a year 3.8%Total 100%

2.4 Kosovo’s migration outlook

KRHS 2011 data show that migration con-tinues to be considered a livelihood strat-egy among many in Kosovo. Similar to the last year’s share of 16%, 15% of the surveyed household heads reported to have specific plans to migrate in the near future. 18 The overwhelming majority (70%) listed econom-ic reasons as the main purpose of migration. 10% plan to migrate for marriage/family re-union purposes, and less than 2% plan to mi-grate for education purposes.

The graph below shows the distribution of household heads with plans to migrate by gender, ethnicity, employment, residence, and receipt of remittances. As may be observed, women household heads are more likely to have plans to migrate than men. Ethnicities other than K-Albanians and K-Serbs are more likely to report to have plans to migrate, as are 18 According to EWS/Public Pulse data since 2004, the share of Kosovan adults with specific plans to migrate in the future has continuously been 30% over the years. Therefore, it must be empha-sized that this figure is lower in the KRS 2012 because the survey interviewed only household heads.

Figure 2.6 Share of emigrants with family members and relatives residing in Kosovo

0%

5%

10%

15%

20%

25% 21.6%

17.1%

14%12.2%

7.8% 7.8% 7.5%

4.1% 3.2% 2.6% 2.6% 1.7%0.3%

Family member in Kosovo

0%

5%

10%

15%

20%

25% 21.6%

17.1%

14%12.2%

7.8% 7.8% 7.5%

4.1% 3.2% 2.6% 2.6% 1.7%0.3%

Family member in KosovoFamily member or relative in Kosovo


31

Koso

vo R

emitt

ance

Stu

dy 2

012

residents of rural areas, unemployed house-hold heads, and those receiving remittances. These results are in line with Kosovo’s context and migration trends; that migration is a re-sort of individuals and households lacking economic opportunities in their home coun-try. This conclusion is also supported by the findings of the Kosovo Human Development Report (KHDR) 2010 on Social Inclusion whereby rural women, Roma, Ashkali and Egyptian (RAE) communities and the long-term unemployed are some of the most vul-nerable groups in Kosovo (UNDP, 2010a).

Alternatively, the higher share of women with plans to migrate may also be explained by the fact that a higher share of them (31%) has family members abroad and receives remit-tances compared to men (24%), hence more women are likely to migrate for family reuni-fication purposes.

Finally, Gjilan/Gnjilane, Prishtinë/Priština, and Prizren are the regions with the highest share of respondents with plans to migrate.19

19 Pejë/Peć and Gjakovë/Đakovica have been merged into a single region to avoid sampling bias errors as Gjakovë/Đakovica was un-derrepresented in the survey.

In order to understand what factors are re-lated to one’s plans to migrate, a correlation analysis was conducted between household head’s plans to migrate and the following sets of variables:

1. Individual characteristics of the household head: gender, age, education level, marital status, employment status, and ethnicity;

2. Household characteristics: house-hold size, proportion of adult men in the household, proportion of adult women in the household, aver-age education level of adult members of the household, percentage of un-employed adults in the household, per capita income, residence, region, whether the household has migrants, and whether it receives remittances.

As Table A7 in Appendix I shows, all the above-listed variables have a statistically sig-nificant correlation with plans of the house-hold head to migrate except for the proportion of adult men and that of adult women in the household and regions of Pejë/Peć, Ferizaj/Uroševac and Prishtinë/Priština.

To better assess the impact of each of the above-listed factors on household heads’ plans to migrate, a logistic regression analysis was conducted controlling for variables that showed a statistically significant correlation.

Table A8 in Appendix I shows that em-ployment status and earning potential of the household head and other adult members, level of income, having household members abroad and receiving remittances, as well as residing in Mitrovicë/Mitrovica and Gjilan/Gnjilane have a statistically significant effect on household heads’ decision to migrate. Spe-cifically:

Mitrovicë/Mitrovica

K-Serb

Employed

Non-recipients

Urban

Pejë/Peć

Ferizaj/Uroševac

Men

K-Albanian

Prizren

Prishtinë/Priština

Rural

K-other

Unemployed

Women

Recipients

Gjilan/Gnjilane

8.2%

9.3%

11.8%

13%

13.2%

13.6%

13.8%

13.9%

14.9%

15.6%

15.7%

16.4%

18%

20%

20.2%

20.2%

22.4%

Characteristics of household head

0% 5% 10% 15% 20% 25%

Figure 2.7 Share of respondents with plans to migrate, by gender, ethnicity, residence, region, and receipt of remittances


32

Koso

vo R

emitt

ance

Stu

dy 2

012


- Education level of the household head was found to be negatively cor-related with plans to migrate. In other words, an additional year of completed education decreases the probability that the household head plans to migrate; - Employment of the household head was found to be inversely correlated with migration plans;

- The average education level of adult household members was found to be negatively correlated with migration plans;

- Proportion of unemployed adult members in the household was found to increase the probabil-ity of the household head to migrate; - Similarly, having family member(s) abroad and receiving remittances was found to increase the probability of a household head planning to migrate; - The level of household income was found to be negatively correlated with the probability to migrate. The higher the income, the lower the probability that the household head has plans to migrate; - Finally, residing in Mitrovicë/Mi-trovica is negatively correlated with households heads’ plans to mi-grate, whereas the opposite is the case for residents of Gjilan/Gnjilane.

Most of these results are in line with results of previous migration prediction models and Kosovo’s context. Indeed, households with low incomes and lacking employment and earning opportunities in their home countries are the ones that resolve to migration and remittances for consumption smoothing, provided that they can afford the transaction costs. Those

costs have been found to decrease with the es-tablishment of migration networks, which is a finding that is also supported by the results of this regression analysis. Household heads that have family members abroad may also be more likely to migrate to reunify their family.20

20 Using household survey data in Egypt, Adams (1993) finds similar results. Education was found to be negatively correlated with migration in rural Egypt; that is, the probability to migrate decreases with the level of education attainment. The author also finds that migration of adult men has an inverse U-shaped correla-tion with level of income. Propensity to migrate was found to be the highest for men with middle income, that is, those who can travel and cover opportunity costs of migration and have an incen-tive to migrate. Mora and Taylor (2003) find a similar, negative cor-relation between migration and household heads’ level of educa-tion in Mexico. In other words, a higher education attainment of the household head increases the level of labour productivity of the whole household simultaneously increasing the opportunity cost of migration (Mora & Taylor, 2003). Similar to KRS 2012 regres-sion analysis, data for Mexico showed that the number of adult men and women in the household is not significantly related to the probability to migrate. Finally, as in Kosovo, the data for Mexico show that migration is a network-driven process. In other words, migration networks have a positive and significant impact on the propensity to migrate (Mora & Taylor, 2003).

33

Koso

vo R

emitt

ance

Stu

dy 2

012

Chapter 3: Use of Remittances and Impact on Human Development of Recipients

Following the methodology of KRHS 2010, the questionnaire of KRHS 2011 included a series of questions on key characteristics of households that would provide an initial in-sight on remittances’ potential impact on hu-man development of recipients. This chapter attempts to make inferences on the latter by comparing recipient and non-recipient house-holds. It must be noted that the term recipi-ent households refers to the 25% households that reported to receive money or goods from abroad.

3.1 Basic characteristics of households

According to KRHS 2011, an average Koso-van household is comprised of 5 members. The average household size among recipients is 4.8 and non-recipients 4.7 members. The gender distribution of men/boys and women/girls is almost the same across recipient and non-recipient households, each comprising around 51.8% and 48.2% of households respectively.

A majority of Kosovan households (92%) live in their own apartments or houses. Re-cipient households show slightly better hous-ing conditions: 95% live in their own pri-vate apartments or houses compared to 91% among non-recipient households; 2% live in rented apartments compared to 4% of non-recipients; and 3.1% live in apartments/houses without paying for rent compared to 4.7% of non-recipients.

The share of households receiving remit-tances is higher among female-headed house-holds 31%, compared to 24% of male-headed households. Most female-headed households receive remittances from their brothers (28%), sons (24%) and husbands (12.5%). Most male-headed households receive remittances from predominately male remitters too. The two top remitters for those households are broth-ers (43%) and sons (28%) (See Table A9 in Ap-pendix I).

The share of households receiving remit-tances is higher among K-Albanians compared to other ethnicities. Approximately 27.2% of K-Albanian households receive remittances, followed by 11% of K-other21 ethnicities and 6.7% of K-Serbs.

21 K-other refers to Bosnians, Gorans, Turks, Roma, Ashkali, Egyp-tians, and other ethnicities residing in Kosovo.

CHAPTER 3: USE OF REMITTANCES AND IMPACT ON HUMAN DEVELOPMENT OFRECIPIENTS

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

K-Albanian K-Serb K-other

27.2%

6.7%11.1%

72.8%

93.3% 89%

Recipient

Non-recipient

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


27.2%

6.7%11.1%

72.8%

93.3% 89%

Recipient

Non-recipient

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


27.2%

6.7%11.1%

72.8%

93.3% 89%

Recipient

Non-recipient

Figure 3.1 Remittance receipt, by ethnicity

34

Koso

vo R

emitt

ance

Stu

dy 2

012

KRHS 2011 data also show that a slightly higher share of households in rural areas re-ceives remittances, 26%, compared to 24% of households in urban areas (See Figure A2 in Appendix I). In terms of regions, Pejë/Peć (37%), Ferizaj/Uroševac and Gjilan/Gnjilane (26% each) host a higher share of remittance recipient households compared to other re-gions. As the graph above shows, the share of remittance recipient households has decreased only in Prizren and Pejë/Peć since 2010. The highest increase has been experienced by Fer-izaj/Uroševac, from 8.6% in 2010 to 26% in 2011. A possible explanation for this occur-rence may be the increasing number of indi-viduals migrating to Afghanistan and Iraq to work for international companies. According to recent research by GAP Institute, the ma-jority of Kosovans working in these countries are from Ferizaj/Uroševac (56%), Prishtinë/Priština (21%) and Gjilan/Gnjilane (19%) (GAP, 2011).

3.2 Household heads and adults in Kosovo: An overview of key characteristics

As the table below shows, the average age of household heads in Kosovo is 48 years. Heads of recipient households are on average 3.5 years older than their non-recipient counter-parts.

Table 3.1 Characteristics of household heads, by receipt of remittances

Household head Recipi-ents

Non-recipients All

Age of household head 50.7 47.2 48.0

Mean years of edu-cation completed 11.0 11.4 11.3

Mean years of edu-cation, women 9.9 9.4 9.6

Mean years of edu-cation, men 11.2 11.7 11.6

0%5%

10%15%20%25%30%35%40%45%

14%

23%18%

26%

9%

43%

20% 20% 22%26% 26%

37%

2010

2011

Figure 3.2 Distribution of recipient households across regions, 2010 and 2011


35

Koso

vo R

emitt

ance

Stu

dy 2

012

The average education of all Kosovan household heads is 11.3 years, but there are statistically significant differences between heads of recipient and non-recipient house-holds and male and female household heads. Remittance recipients report to have com-pleted 0.4 years less education on average. The average education for women is 9.6 years, 2 years less than men. Interestingly, women from recipient households reported to have completed 0.5 more years of education than their non-recipient counterparts.

KRHS 2011 data show that the average education of adults (aged 18 and above) in Kosovo is 11.4 years. Adult men report to have completed 11.9 years on average whereas women report just 10.9 years on average. The differences in education across gender groups by remittance receipt are small yet statistically significant. The average education level of men in non-recipient households (12 years) is 0.3 years higher compared to their counterparts in recipient households (11.7 years). The av-erage education level of non-recipient women (10.9 years) is only a fraction higher compared to their recipient counterparts (10.8 years).

As for female household heads, the smaller difference in education attainment of women between the two sets of households suggests that remittances in Kosovo may favour this group in terms of human capital investment.

3.3 Income and expenditures of Kosovan households

In terms of income, the survey results show that the mean income for a Kosovan house-hold is €546 per month. Quite interestingly, however, the data show that the mean monthly income excluding remittances is higher for re-mittance recipient (€580) than non-recipient households (€536). Such a statistically signifi-cant difference may imply that remittances are not channelled to the poorest households but to the ones with middle income and might be contributing to income inequality in Kosovo.

Table 3.2 Mean household income including and excluding remittances, by receipt of remit-tances

Mean month-ly income excluding

remittances

Mean monthly income including

remittances

Recipient households € 580 € 694

Non-recipient households € 536 € 536

All house-holds € 546 € 575

As expected, when the value of monthly cash remittances are added (€146 on average) to the total household income of recipients, the overall mean household income increases

to €575. Remittance recipients have an income of around €694, which is 30% higher than their non-recipient counterparts.

10.2

10.4

10.6

10.8

11

11.2

11.4

11.6

11.8

12

Men Women

11.7%

10.9% 10.9%

12%

10.8%

12%

Recipients

Non-recipients

All

Figure 3.3 Average education attainment of adults in Kosovo by gender and receipt of remittances, in years

10.2

10.4

10.6

10.8

11

11.2

11.4

11.6

11.8

12

Men Women

11.7

10.9 10.9

12.0

10.8

11.9

Recipients

Non-recipients

All


36

Koso

vo R

emitt

ance

Stu

dy 2

012

However, compared to last year, the mean income of recipient households has decreased by almost 22%, mainly due to a decline in the average monthly amount of remittances re-ceived from €239 in 2010 to €146 in 2011.

A disaggregation of total household in-come by its sources illustrates the magnitude of remittances’ importance to families in Kosovo. As may be observed in Table A10 in Appendix I, remittances are the second largest income source, comprising 20.1% of recipi-ents’ household income on average. That is a share drastically higher than any formal social protection benefit or non-permanent employ-ment activity. Income from permanent em-ployment on the other hand comprises 49% of all households’ income on average, whereas income from non-permanent employment and self-employment comprise 9.4% and 6.6% of all Kosovan households’ income on average respectively.

Although income from permanent em-ployment is the main source of income for the majority of households regardless of receipt of remittances, its ratio (and importance) varies between recipient and non-recipient house-holds. As the graph below shows, three top income sources among recipient households are: permanent employment at 40.3%, remit-tances from family members living abroad at 20.1%,22 and support from family members living (and working) in other regions in Koso-vo (internal remittances) at 14%. Further, in-come from non-permanent employment and self-employment jointly comprise 15.2% of these households’ income.

22 In a survey interviewing 925 households in Kosovo between November and December 2008 (654 of which had one or more household members practicing migration for one year or longer), In-ternational Agency for Source Country Information (IASCI) found that remittances make up 22% of household income in Kosovo (IASCI, 2010, p.5)

Figure 3.4 Recipient households’ main sources of income, mean ratios

For non-recipient households on the other hand, income from permanent employment accounts for 66.4% of total household in-come on average. When adding shares of in-come from other types of employment – non-permanent, self- and seasonal employment – KRHS 2011 data show that income from employment is the main source of income for non-recipients, amounting to more than 90% of their total income on average. In contrast to recipients, pensions are ranked the fourth top income source for non-recipients, comprising 3.7% of their total income.

40.3%

20.1%

14.0%

8.5%

6.7%

10.4%Permanent employment

International remittances

Internal remittances

Non-permanent employment

Self-employment

Other

40.3%

20.1%

14.0%

8.5%

6.7%





Self-employment

Other

40.3%

20.1%

14.0%

8.5%

6.7%





Self-employment

Other


37

Koso

vo R

emitt

ance

Stu

dy 2

012

Recipient households € 362

Non-recipient households € 332

All households € 339

Table 3.3 Mean household expenditure, by receipt of remittances

Regardless of the higher household expen-diture due to receipt of remittances, the ex-penditure pattern of households in Kosovo is similar.

Expenditures on food, housing, non-food and semi-durable goods24 account for 73% of household expenditures on average. As Table A11 in Appendix I and Figure 3.7 below show, non-recipient households spend a statisti-cally significant higher share of their income on food, non-food and semi-durable goods compared to recipient households. The latter spend more on housing, health, education, transportation and durable goods. Bearing in mind that the differences in household size and structure between recipients and non-recipients are small, a higher ratio of expen-ditures on human capital implies that remit-tances might have a positive impact on human capital development.

Figure 3.6 Top expenditure categories of Kosovan households

24 Non-food goods include: alcohol, cigarettes, and everyday house-hold goods such as hygienic products, detergents, etc. Semi-durable goods include: clothes, shoes, and furniture.

66.4%12.3%

8.4%

3.7%2.9% 6.2%

Permanent employment


Self-employment

Pensions

Occasional/seasonal employment

Other sources of income

66.4%12.3%

8.4%

3.7%2.9% 6.2%



Self-employment

Pensions



66.4%12.3%

8.4%

3.7%2.9% 6.2%



Self-employment

Pensions



73%

27% Food, housing, non-food and semi-durable goods

Health, transportation, entertainment, education, durable goods, debt repayment, savings and investments

73%



73%



Figure 3.5 Non-recipient households’ main sources of income, mean ratios

As the table below shows, receipt of remittanc-es increases the expenditure level of recipient households. The expenditure level of remit-tance recipient households in Kosovo is 9% higher than that of non-recipient households.

Mean monthly expediture23

23 The total household expenditures were calculated adding expenditures on the following: food, non-food products (alcohol, cigarettes, and hygienic goods), semi-durable goods, durables goods, housing, health, education, transportation, entertainment, business investments, savings and debt repayment. As may be deduced from the table, there is a very large difference between the reported house-hold income and expenditures. A possible explanation could be the small number of households that reported their savings (7.5%) and debt repayment (10.1%) expenditures.


38

Koso

vo R

emitt

ance

Stu

dy 2

012

3.4 Distribution of households across in-come and expenditure quintiles

The graph below displays the distribution of remittance recipient and non-recipient households across income (including remit-tances) quintiles. As may be observed, the largest share of remittance recipients are dis-tributed across the third, fourth and fifth rich-est income quintiles.

In contrast, the largest share (33%) of non-recipient households belongs to the first quintile. In addition, the share of recipient households in the third and fifth quintiles (in particular) is significantly higher compared to their non-recipient counterparts. This distribution is reasonable with the 30% difference in mean household income between remittance recipients and non-recipients. Moreover, considering the migration trends in Kosovo, this incidence of recipients may imply that remittances are either channelled to some of the better off households or that they have increased the income level and welfare of re-cipients over time.

Figure 3.7 Distribution of household expenditure across categories, mean ratios

Figure 3.8 Distribution of households across income (including remittances) quintiles, by receipt of remittances

0%

5%

10%

15%

20%

25%

30%

35%

Quintile 1 €(20-300)

Quintile 2 €(302-400)

Quintile 3 €(403-542)

Quintile 4 €(543-800)

Quintile 5 €(802-12,680)

13.2%15.3%

23.6% 24.7% 23.2%

28%

16.5%16.6%

21.9%

17.1%

32.9%

16.9%14.2%

20.9%

15%

Recipient households Non-recipient households All

0%

5%

10%

15%

20%

25%

30%

35%

40%

45%40%

13.4%

9.9% 9.6%

5.7% 5.5% 4.5% 4%2.7% 2.1% 1.3% 1.3%

37.3%

14.0%

9.7% 9.6%

6.5% 6.4% 4.5% 4.4%3.5% 1.8% 1.2% 1.4%

40.8%

13.3%

10.0% 9.7%

5.4% 5.2%4.3% 3.9%

2.5% 2.2% 1.3% 1.2%

All Recipients Non-Recipients


39

Koso

vo R

emitt

ance

Stu

dy 2

012

0%

5%

10%

15%

20%

25%


Quintile 2 €(285-375)

Quintile 3 €(380-500)

Quintile 4 €(510-750)

Quintile 5 €(753-12,180)

13.2%15.3%

23.6% 24.7% 23.2%18.8%19.7% 20%

23.7%

17.8%

Recipient households (income including remittances)

Recipient households (income excluding remittances)

A simple simulation, subtraction of remit-tances from household income, shows that their absence would have a detrimental im-pact on recipients.

Since the literature mainly uses expenditure as a more neutral measure of households’ wel-fare, the graph below shows the distribution of households across expenditure quintiles.

The distribution of recipient households in the first and second poorest quintiles would increase by 41.7% and 31% respectively, while their share in the fourth and fifth richest quin-tiles would simultaneously decrease by 28% and 19.1% respectively.

0%

5%

10%

15%

20%

25%


Quintile 2 €(205-260)

Quintile 3 €(261-350)

Quintile 4 €(351-500)

Quintile 5 €(505-20,350)

15.2%

21.7% 21.5%23.4%

18.2%

21.8%19.4%

21.4% 21.1%

16.4%

20.1% 20.0%21.4% 21.7%

16.8%

Recipient households Non-recipient households All

Figure 3.9 Distribution of remittance recipient households across income (with and without remittances) quintiles

Figure 3.10 Distribution of households across expenditure quintiles, by receipt of remittances

The distribution of the two sets of house-holds is more equal, but a considerably lower percentage (around 15%) of recipients belongs to the first quintile, whereas a higher share of them (compared to non-recipients) is distrib-uted across the fourth and fifth richest quin-tiles.


40

Koso

vo R

emitt

ance

Stu

dy 2

012

3.5 Use of remittances

As has been discussed in the first chapter, the impact of remittances on human devel-opment largely depends on the profile of re-cipients and the consumption categories they are invested in. As the expenditure profile of households showed in the previous section, the main expenditure categories of recipient households are similar to those of non-recip-ients.

For a clearer picture of the use of remit-tances, respondents were asked to estimate their usage across consumption categories. As the graph below shows, remittances are main-ly used for current consumption among recip-ients. Expenditures on food, clothing, services and utilities comprise 35.4%. Expenditures on home appliances, cars, weddings, funerals, etc. comprise 24.8%. Renovation and purchase of apartments/houses account for 19.6%, and expenditures on education and healthcare services comprise 10.6% of total remittance expenditures (See Table A12 in Appendix I). These figures suggest that, in addition to fi-nancing the basic consumption of recipient households and improvement of housing con-ditions, a considerable share of remittances is channelled to two essential components of hu-man development: education and healthcare.

It must be noted that the mean ratio of remittance investments on human capital is the same regardless of the decision-maker. In other words, the mean expenditure ratio of remittances on human capital is the same re-gardless of whether the senders or recipients decide where remittances should be spent or whether the decision-maker or household head in Kosovo is a man or a woman.

Figure 3.11 Distribution of remittances across consumption categories, mean shares

As Table A12 in Appendix I shows, a very small share of remittances, less than 8% on average, is used for productive activities. An average of only 4% of remittances is used for business investments such as purchase of land at 0.8%, business start-up or acquisition at 0.9%, and purchase of productive assets at 2.2%. A similarly low share of remittances, 3.7% on average, is saved by the recipients.

35.4%

24.8%

19.6%

10.6%

3.9%3.7% 2.0%

Current consumption

Other consumption

Housing investments

Human capital investment

Business investment

Savings

Debt repayment

35.4%

24.8%

19.6%

10.6%

3.9%3.7% 2.0%

Current consumption

Other consumption

Housing investments


Business investment

Savings

Debt repayment

35.4%

24.8%

19.6%

10.6%

3.9%3.7% 2.0%

Current consumption

Other consumption

Housing investments


Business investment

Savings

Debt repayment


41

Koso

vo R

emitt

ance

Stu

dy 2

012

3.6 Impact of remittances on human development

An optimal methodology for impact evalu-

ation of remittances on recipient households would be observation of the same households over time using panel data. Given that no such study has been carried out in Kosovo and that both KRHS 2010 and KRHS 2011 are cross-sectional data, this section tries to make in-ferences about remittances’ impact based on comparisons of recipients and non-recipients within Kosovo’s migration context.

Although recipient households’ income and expenditure levels are higher compared to non-recipient households, the former are not significantly more satisfied with their pres-ent socio-economic situation. As Table A13 in Appendix I shows, 87% of recipient house-holds believe their overall economic situa-tion is good or very good compared to 85% of non-recipient households. A higher share of remittance recipients also report to be satisfied with their nutrition, housing, and particularly possession of productive assets’ situation com-pared to their non-recipient counterparts.

As shown in the previous sections of the chapter, remittances in Kosovo significantly increase the income level and consequently the expenditure of recipient households, al-lowing them to improve their livelihoods and future earning potential through investment on human capital. In particular:

1. Expenditure on food: A comparison of recipients’ and non-recipients’ expendi-ture categories shows that non-recipients spend more of their money on food, non-food and semi-durable goods compared to recipient households. Using a Food Poverty

Line (FPL) approach25 - which stipulates that poorer households spend a greater share of their expenditures on food - these expendi-ture pattern differences suggest that remit-tances have improved the nutrition status of recipients.

2. Expenditure on housing: A compari-son of expenditure categories and use of re-mittances also showed that recipients spend a (statistically significant) higher share of their income on housing and durable goods compared to non-recipients. In addition, 20% of remittances are spent on improv-ing housing conditions. Bearing in mind that a higher share of recipient households, 95%, live in their own apartments or hous-es (compared to 91% of non-recipients), whereas a lower share, 2%, (compared to 4% among non-recipients) rent their liv-ing space implies that remittances have im-proved the housing conditions of many re-cipient households.

3. Expenditure on education: KRHS 2011 data analysis also implies that remit-tances have improved the employment and earning profile of younger recipients through higher spending on human capital compared to non-recipients. Investment in human capital is the fourth largest expendi-ture category of remittances, amounting to almost 11% of the total. Considering that the emigrants originate(d) from the most disadvantaged households, the small dif-ference in education attainment between recipients and non-recipients, especially among women and young girls, suggests that a share of remittances has been invested in human capital development.

25 Engel’s Law: As income rises, the proportion of income spent on food falls, even if actual expenditure on food rises.


42

Koso

vo R

emitt

ance

Stu

dy 2

012

43

Koso

vo R

emitt

ance

Stu

dy 2

012

As shown in the previous chapter, remit-tances commonly have a positive impact on recipients by increasing their income, hence consumption levels. By increasing levels of human capital investment, remittances have the potential to improve the employment and earning profile of younger members of recipi-ent households. However, the literature also provides examples of a negative impact of remittances on a micro level in the form of creating dependency among recipients. Spe-cifically, it is thought that remittances have a spoil effect on recipients by keeping them away from the labour market. That may cause recipients to not seek employment when un-employed, increasing the duration of their un-employment (as recipients are more selective of jobs) and decreasing the working hours of the employed.26 This chapter looks into dif-ferent aspects of remittances’ impact on la-bour supply, which includes: employment of adult household members, reservation wages of household heads, and number of weekly working hours of household heads.

The survey questionnaire included a wide array of questions on individual characteris-tics of household heads and members such as their gender, age, education, employment, and other demographic variables.

26 Using Living Standards Measurement Survey (LSMS) 2002 data for Kosovo, Bislimi & Kayhan use regression analysis to assess the impact of remittances on the labour supply of recipients. The results showed that remittances have a negative correlation with number of hours worked by employed recipients (Bislimi & Kayhan, 2007). Kim (2006) and Bussolo and Medvedev (2008) use pseudo-panel data analysis to find that remittances have a strong impact on labour participation, but not on weekly working hours of remittance recipi-ents in Jamaica (Kim, 2006; Bussolo & Medvedev, 2008). Funkhouser (1992) also finds a strong negative effect of remittances on labour market participation of non-migrants in El Salvador (Funkhouser, 1992). Amuedo-Dorantes and Pozo (2006) find that remittances neg-atively affect the labour supply of both men and women in Mexico (Amuedo-Dorantes & Pozo, 2006). Acosta (2006), on the other hand, finds that remittances in El Salvador decrease the labour supply of women, but do not affect that of men (Acosta, 2006).

Household heads were asked additional ques-tions on their employment status such as their: income earned, employment sector, number of working days per week and working hours per day, duration of employment, registration with PES if unemployed, and minimum wage they would be willing to work for if offered a job (reservation wage).

Using the aforementioned variables and definitions of the Labour Force Survey (LFS)27 for labour force and unemployment, KRS 2012 results show that the unemployment rate in Kosovo is around 46.9%. Nonetheless, the rate is not uniform when disaggregated by re-ceipt of remittances. The unemployment rate is nearly 5 percentage points higher for remit-tance recipients (50.3%) compared to non-re-cipients (45.8%).

4.1 Employment status of household heads in Kosovo: An overview

The differences in employment status be-tween household heads of recipient and non-recipient households are greater than the un-employment rates above may suggest. 77.8% of non-recipient male household heads report

27 Kosovo Labour Force Survey (LFS) defines the labour force as the total number of employed and unemployed individuals aged 15-64. The unemployed persons are defined as those who: had no employ-ment during the reference week, had actively sought employment during the previous four weeks, and were available to start work the next two weeks (KAS, 2009). KRHS 2011 gave the respondent the fol-lowing options: 1) Employed; 2) Unemployed, looking for work; 3) Unemployed, not looking for work; and 4) Not applicable to define their employment status. Therefore, the labour force survey provides the sum of individuals who reported to be employed and those who reported to be unemployed and seeking for work.

CHAPTER 4: IMPACT OF REMITTANCES ON THE LABOUR SUPPLY OF RECIPIENTS

Chapter 4: Impact of Remittances on the Labour Supply of Recipients

44

Koso

vo R

emitt

ance

Stu

dy 2

012


to be employed compared to about 70% of their recipient counterparts. The gap is smaller but also statistically significant for women: 33.3% of non-recipient female household heads re-port to be employed compared to 29.4% of their recipient counterparts.

According to KRHS 2011, there is no statis-tically significant difference between working members of remittance recipient and non-re-cipient household heads in terms of the daily hours of work or working days per week. Re-mittance recipients work on average 8.3 hours a day while their non-recipient counterparts work 8.2 hours on average. Household heads from both groups work 5.6 days per week on average. In contrast, non-recipient household heads report to have been employed almost one year longer than recipients, 9.6 years com-pared to 8.7 years on average respectively.

KRHS 2011 data indicate that there are no great differences between remittance recipi-ents and non-recipients with regard to their employment sector. A considerable percent-age of persons in both groups are employed in the public sector: around 27%: However, a higher share of non-recipients works as em-ployees in the private sector: 42% compared to 31.8% of recipients.

Interestingly, a higher share of non-recipients 3.3% is self-employed, compared to 2.0% of recipient household heads, suggesting that re-mittances not channelled to entrepreneurial or other productive activities. (See Table A14 in Appendix I).

Moreover, the graph below suggests that remittances may have a negative impact on recipient household heads’ labour participa-tion, especially among women. While the unemployment rates are similar for both groups (gender and remittance receipt), sig-nificant differences are noted among the inac-tive persons: about 22% of remittance recipi-ent household heads are outside the labour force compared to 14% of non-recipients. The share of unemployed male household heads not looking for work is around 7 percentage points higher for recipients (17.2%) than non-recipients (10.3%). The percentage of inactive female household heads is drastically higher compared to men. 49.4% of female household heads among recipients are unemployed and not looking for work compared to 42.4% of women heading non-recipient households.

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Percent employed Percent employed, women Percent employed, men

0.6367

0.2938

0.6960.729

0.333

0.7780.7073

0.3217

0.759

Recipients

Non-recipients

All

Figure 4.1 Percentage of employed household heads, by gender and receipt of remittances

0

10%

20%

30%

40%

50%

60%

70%

80%

Percent employed Percent employed, women Percent employed, men

63.7%

29.4%

69.9%72.9%

33.3%

77.8%70.7%

32.2%

75.9%

Recipients

Non-recipients

All

45

Koso

vo R

emitt

ance

Stu

dy 2

012

Similar differences in employment status have also been noted between other adult members of recipient and non-recipient households, suggesting that the level of labour market participation is lower for remittance recipients. A higher share, 30% of adults from non-recipient households is employed com-pared to 27% of their counterparts from re-cipient households.

While the shares of unemployed individu-als are almost the same for men and women and recipients and non-recipients, ranging between 43% and 45% on average, the share of inactive women is significantly higher com-pared to men, by approximately 25 percentage points.

0% 10% 20% 30% 40% 50% 60% 70% 80%

Non-recipient men

Non-recipient women

Recipient men

Recipient women

33.3%

29.4%

77.8%

69.6%

24.3%

21.2%

11.9%

13.2%

42.4%

49.4%

10.3%

17.2%

Percent uenmployed, not looking for work Percent unemployed, looking for work Percent employed

Figure 4.2 Percentage of unemployed household heads, by gender and receipt of remittances

Figure 4.3 Employment of adult household members, by gender and receipt of remittances


05%

10%15%20%25%30%35%40%45%50%

Women Men Women Men Women Men

Employed Unemployed looking for work

Unemployed not looking for work

15.9%

43.2%45.4%

43%38.7%

13.9%

20%

44.6%44.3% 43.9%

35.8%

11.5%

Recipients

Non-recipients

46

Koso

vo R

emitt

ance

Stu

dy 2

012

The survey data show that slightly more than half, 52.3% of all unemployed Kosovan household heads register with PES.

From a remittance perspective, the share of unemployed women heads that are not regis-tered with PES is by far greater among remit-tance recipient than non-recipient households (61.5% vs. 40.6%). The share of male house-hold heads that are not registered with PES is also greater among remittance recipient households than non-recipients: by more than 14 percentage points.

These results suggest that the willingness to find a job is significantly lower among the unemployed remittance recipient households heads than non-recipients.

When looking at the key reasons why some of the unemployed choose not to look for work, the survey showed that recipients and non-recipients do not differ significantly ex-cept on one factor (See Table A15 in Appendix I). Around 11.7% of the unemployed heads of recipient households indicate that the key reason for their self-exclusion from the labour force is the financial support they receive from their family abroad.

This finding indicates that remittances may play a negative role on unemployed recipients by keeping them ‘away’ from the labour force.

Finally, although a number of studies in the literature (see the first section of this chapter) have found that remittances increase the res-ervation wage of the unemployed as well as the duration of unemployment as the recipients are more selective of employment opportuni-ties, KRHS 2011 data show that this may not be entirely the case in Kosovo. When asked about the minimum wage range for which they would accept a job, the responses of un-employed household heads of recipient and non-recipient households were fairly similar. Almost half of both groups, 46% among non-recipients and 49% among recipients, would accept to work for a salary between €201 and €250 per month. A slightly higher share, 4.8%, of non-recipient household heads is willing to work for a salary between €101 and €150, compared to 3.8% of recipients. A consider-ably higher share of non-recipients, 13.2%, is willing to work for a salary between €151 and €200 per month compared to 6.9% of remit-tance recipients.

Figure 4.4 Minimum reservation wages, by remittance receipt


0% 10% 20% 30% 40% 50%

€(0-50)

€(51-100)

€(101-150)

€(151-200)

€(201-250)

€(251-300)

€(301-350)

€(351-400)

€(401-450)

Above €451

2.2%

3.8%

6.9%

49.1%

1.5%

18.7%

7.9%

4.1%

5.8%

0.7%

1.9%

4.8%

13.2%

45.9%

1.9%

12.1%

8.6%

5.0%

6.0%

Non-recipients

Recipients

0% 10% 20% 30% 40% 50%

€(0-50)

€(51-100)

€(101-150)

€(151-200)

€(201-250)

€(251-300)

€(301-350)

€(351-400)

€(401-450)

Above €451

2.2%

3.8%

6.9%

49.1%

1.5%

18.7%

7.9%

4.1%

5.8%

0.7%

1.9%

4.8%

13.2%

45.9%

1.9%

12.1%

8.6%

5.0%

6.0%

Non-recipients

Recipients

47

Koso

vo R

emitt

ance

Stu

dy 2

012

4.2 Impact of remittances on labour supply: Regression analysis

As some of the descriptive statistics have

shown, receipt of remittances seems to be correlated inversely with labour supply of unemployed individuals, especially that of women. In order to understand what fac-tors affect the passivity of working age indi-viduals who do not look for employment, a correlation analysis was conducted between these individuals and the following variables:

- Individual characteristics of adult household members (aged 15-64): age, gen-der, education attainment, and ethnicity;

- Household characteristics: household size, whether the household receives remit-tances, number of years that the household has been receiving remittances, monthly cash remittances received, whether the household expects more remittances next year, residence, and region.

As Table A16 in Appendix I shows, all of the above-listed variables have a statistically significant correlation with being unemployed and not looking for work, except for the monthly amount of cash remittances trans-ferred to households and being a resident of Mitrovicë/Mitrovica.

For a better assessment of the impact of each of the above-listed factors on unem-ployed adults not looking for work, a logistic regression analysis was conducted controlling for variables that showed a statistically

significant correlation.28 Table A17 in Appen-dix I shows that residing in Prishtinë/Priština is the only variable that does not have a statis-tically significant explanatory power for being outside the labour market. On the other hand, age, gender, education attainment, ethnicity, household size, receiving remittances, and residing in rural areas or Prizren, Gjilan/Gn-jilane, Pejë/Peć or Ferizaj/Uroševac, all have a statistically significant effect on being unem-ployed and not looking for work. In particular:

- Age has been found to be negatively correlated with the probability of being outside the labour market. However, this relationship is not linear but U-shaped, as the figure of squared age suggests. In other words, an additional year of age decreases the likelihood of being outside the labour market but after a certain point the trend is reversed, and the probability of being pas-sively unemployed increases with an in-crease in age;

- Being a man is negatively correlated with being unemployed and not looking for work;

- The education level has also been found to be negatively correlated with be-ing unemployed and not looking for work. In other words, the likelihood that an indi-vidual is unemployed and not looking for work decreases with each additional year of education;

- Compared to K-other ethnicities, be-ing K-Albanian increases the likelihood of being outside the labour market, whereas being K-Serb decreases it;

28 The statistical software Stata automatically drops receipt of remit-tances when controlling for remittances expectations to avoid multi-collinearity. Therefore, the regression model was slightly modified and controls only for remittance receipt of all related variables.


48

Koso

vo R

emitt

ance

Stu

dy 2

012

- Individuals from larger households are less inclined to be outside the labour mar-ket, possibly because of higher pressures on expenditure levels;

- Receiving remittances is positively correlated with being unemployed and not seeking employment;

- Residing in rural areas is positively cor-related with being passively unemployed;

- Finally, residing in regions of Pejë/Peć, Prizren, Gjilan/Gnjilane and Ferizaj/Uroševac decreases the likelihood of being unemployed and not looking for work.

Bearing in mind the macroeconomic (es-pecially labour market) conditions as well as the characteristics of households in Kosovo introduced throughout the report, most of these results are in line with Kosovo’s context and migration literature. As has been shown in the descriptive statistics, a drastically high-er share of women is outside the labour force compared to that of men due to structural problems in the labour market. In addition, considering the low absorption capacity of the labour market and the low education levels in Kosovo, it is reasonable that the more edu-cated, young individuals have a comparative advantage over other groups.

This explains the lower probability that these individuals are outside the labour force. The relationship between age and “passive un-employment” is U-shaped rather than linear, which has also been proven by LFS 2009. The latter found that age groups 15-24 (especially) and 55-65 have lower employment rates than the 25-54 age group (KAS, 2009). Further, bearing in mind that rural areas are charac-terized by higher rates of exclusion (UNDP, 2010a), residing in a rural area logically in-creases the likelihood of remaining outside the labour market. Finally, as has been found in the literature, though the amount of remit-

tances has no impact, receipt of remittances is positively correlated with being unemployed and not looking for work. In other words, controlling for the aforementioned charac-teristics, this regression analysis shows that remittances have a spoil effect on recipients. By being a continuous source of income, re-mittances create an incentive for recipients to remain outside the labour market.


49

Koso

vo R

emitt

ance

Stu

dy 2

012

Chapter 5: Emigrants’ Income, Investment and Savings Behaviour: Potential for Development

5.1 Remittance flows to Kosovo

According to KRHS 2011 data, 25% of

households in Kosovo receive cash and goods from their family members abroad. The aver-age annual value of cash remittances is €1,747 per household. Their average monthly value of €146 is ranked the second largest source of in-come for recipient households, amounting to about 20% of their total household income.

The average amount of in-kind remittances received by households is also fairly consider-able, and even higher than that of cash remit-tances, amounting to €3,273 per household on average.29

29 The respondents were asked to estimate the value of in-kind remittances they received.

As displayed in the graph below, a major share (69%) of in-kind remittances consists of vehi-cles (34%), and home appliances and furniture (35%). Education costs (8%) and healthcare services (8%) that are directly paid by emi-grants for recipient households make up the next biggest shares of how in-kind remittances are provided. Consumption paid directly for by emigrants and the provision of machinery (tractors, combines, etc.) make up 7% and 5% respectively of in-kind remittances. And last-ly, the provision of land makes up only 3% of in-kind remittances.

In addition to cash and in-kind remittanc-es, emigrants also contribute to the economy through expenditures when visiting Kosovo.

CHAPTER 5: EMIGRANTS’ INCOME, INVESTMENT AND SAVINGS BEHAVIOUR: POTENTIAL FOR DEVELOPMENT

0%

5%

10%

15%

20%

25%

30%

35%

Homeappliances &

furniture

Vehicle Educationservices

Healthcareservices

Consumption Productiveassets

Land

35% 34%

8% 8% 7%5%

3%

Type of in-kind remittances

Figure 5.1 Distribution of in-kind remittances by type

50

Koso

vo R

emitt

ance

Stu

dy 2

012


More than half of emigrants, 57.1%, report to visit Kosovo once a year whereas 35.6% visit it more than once a year, using either cars (40.5%) or airplanes (53.8%) as means of travel. Moreover, during their visits to Kosovo, a majority, 95% stay between two weeks and a month. The table below shows that the av-erage annual amount of cash that emigrant households spend during their visits to Koso-vo (excluding transportation expenditures) amounts to €2,353.

Table 5.1 Emigrants’ average expenditures dur-ing visits to Kosovo, by visit frequency

Frequency of visits to Kosovo Average expenditure

Less than once a year € 1,388Once a year € 1,456Twice a year € 1,548Three to four times a years € 1,690More than four times a year € 1,751Average € 2,353

Remittances are mainly used to finance the basic consumption needs of recipients. The majority of emigrants, 94.4% report to send remittances to support their families in Koso-vo while the remaining 2.4% send remittances for saving money in banks, buying property, investing in family business, or lending to friends and family.

A very small share of cash remittances is invested in productive/entrepreneurial activi-ties, less than 4%, and just 3.7% is saved by the recipients. Similarly, in-kind remittances also finance basic consumption. As Figure 5.1 above showed: only 5% of in-kind remittances received were in the form of productive assets (machinery, tractors, etc), and only 3% were in the form of land investments (purchase of land). This chapter seeks to provide an over-view of emigrants’ investment and savings be-haviour while quantifying the investment and savings potential of remittances in Kosovo. First, because remittances are sent from coun-tries abroad, an overview of transfer channel utilization will be provided.

0%10%20%30%40%50%60%70%80%90%

100%

Supportfamily

Other Buy property Invest in abusiness

Lend tofamily orfriends

Save

94.4%

3.3% 0.7% 0.6% 0.6% 0.5%

Figure 5.2 Reason for sending remittances to Kosovo

51

Koso

vo R

emitt

ance

Stu

dy 2

012


5.2 Remittance transfer channels

KRS 2010 found that about 58% of re-mittances were received through informal channels, namely in-person by emigrants or friends, and 42% through formal channels, namely bank transfers, credit / debit cards, transfers through Money Transfer Agencies (MTAs) and post-offices.

The KRHS 2011 data suggest that channels of transfer have been formalizing, especially with an increased utilization of banks. Ac-cording to the data, only 42.8% of remittances are received through informal channels (in-person by emigrants or their friends) while the remaining 57.2% are received through formal channels (banks, credit/debit cards, MTAs, or post offices).

Even though they report to be rather equal in terms of financial literacy, 88% of emigrant women and 92% of emigrant men possess a bank account, there is a large gap in the uti-lization of formal transfer channels between the two groups. As the table below shows, only 29% of remittances sent by emigrant women are transferred to Kosovo through

banks, whereas more than 57% are brought to Kosovo by them in person or their friends. In addition, no emigrant women reported to uti-lize credit/debit cards or mail services to send their remittances to Kosovo.

Table 5.2 Remittance transfer channels, by gen-der of emigrant

Transfer channel Women MenBank transfer 29.0% 40.5%Credit/debit card - 1.2%Money transfer agency 13.9% 16.9%Post office - 0.9%In-person (by emigrant or friend)

57.2% 40.5%

Recipients’ possession of a bank account also plays a role in formalization of remittance transfers. The table below shows that a share of emigrants may resort to informal channels or non-bank remittance transfers because their family members in Kosovo do not possess a bank account.

KRHS 2011 shows that 74.7% of remittance recipients have a bank account. The share is lower among female household heads: 67.2% compared to 76.3% of male household heads.

0%

10%

20%

30%

40%

50%

60%

Bank transfer Credit/debit card Money transferagency

Post office In-person(by migrant or

friend)

16%

2%

23%

2%

58%

38.9%

1.2%

16.5%

0.7%

42.8%

KRHS2010 KRHS2011

Figure 5.3 Remittance transfer channels, 2010 and 2011

52

Koso

vo R

emitt

ance

Stu

dy 2

012

Table 5.3 Recipients’ possession of a bank ac-count, by gender of household head

Possession of a bank account Women Men Total

Yes 67.2% 76.3% 74.7%

No 32.8% 23.7% 25.3%

In order to identify key issues behind choice of transfer channels, remitters were asked to rank the reasons why they did not utilize formal transfer channels in order of importance (low, high, neutral). As may be observed in the graph below, more than half, 55% of the respondents claim that the reason they do not use banks/formal transfer channels is the high transfer costs30. On the other hand, 24.1% of respondents claimed that they do not use formal transfer channels because they are bureaucratic, 27.5% claimed they fear the authorities, and 30.2% claimed they distrust banks.

30 In its report on Remittances from Afghanistan, GAP Institute (2011) compares the regional tariffs of money transfers from abroad. According to the report, Kosovo has the highest tariffs in the region (compared to Albania, Bosnia and Herzegovina, Croatia, FYR of Macedonia, Montenegro, and Serbia) for money transfers from abroad: €5 for transfers amounting to €100 and €10 for transfers amounting to €500 (GAP Institute, 2011).

When asked what transfer channel they would use if all the costs were the same, the over-whelming majority of emigrants (70%) select-ed formal channels. This result suggests that costs associated with transfer of remittances are very important in the selection of trans-fer channels. The highest share of emigrants claimed they would use banks 47.6%, followed by around 19% who would use MTAs while slightly more than 3% would prefer using debit/credit cards or post offices to send remittances. Still, slightly more than 30% of emigrants would prefer using informal channels if costs of all transfer channels were the same.

Figure 5.4 Reasons for not using formal transfer channels, ranked by importance (low, neutral, high)


0% 10% 20% 30% 40% 50% 60% 70%

Expensive

Bureaucratic

Fear of authorities

Distrust of bank

54.9%

24.1%

27.5%

30.2%

22.8%

62.9%

54.0%

54.8%15.1

18.5%

14.5%

22.3%

Low Neutral High0% 10% 20% 30% 40% 50% 60% 70%

Expensive

Bureaucratic

Fear of authorities

Distrust of bank

54.9%

24.1%

27.5%

30.2%

22.8%

62.9%

54.0%

54.8%15.1

18.5%

14.5%

22.3%

Low Neutral High

53

Koso

vo R

emitt

ance

Stu

dy 2

012

Figure 5.5 Transfer channel preferences

5.3 Emigrants’ investment and savingsbehaviour

As discussed in Chapter 2, KRHS 2011 data

showed that the majority of emigrants, 93.8%, are employed in host countries. According to the table below, the majority of emigrant households, about 79%, have a household in-come between €1,500 and €4,000 or more on average per month: 27.2% of emigrant house-holds earn between €1,501 and €2,000 per month on average, 35% earn €2,000 - €4,000 per month on average, and about 17% earn more than € 4,001 per month on average.

Table 5.4 Remitters’ monthly average house-hold income, by income intervals

Remitters’ average household income PercentLess than €500 1.7%€(501-1,000) 7.2%€(1,001 - 1500) 12.1%€(1501 - 2000) 27.2%

€(2,000 - 4,000) 35.0%€4,001 or more 16.7%

Total 100%

Thanks to their high earnings, emigrants re-port to save (18%) and invest (20.4%) rather considerable shares of their total household income on average. Women report to save a higher share of their total income (20%) on average compared to men (17.4%). Women also report to invest a higher share of their to-tal income (30%) compared to men (18.7%).

The share of income that emigrants send to Kosovo in the form of remittances is consid-erably higher than the share of income they save or invest in Kosovo. As the table below shows, more than half of the emigrants remit more than 10% of their household income to Kosovo. In particular, about 35% of emigrants remit between 11 and 20% of their income to Kosovo, 10.6% remit between 21 and 30% of their income to Kosovo and slightly less than 3% remit between 41 and 50% of their total household income to Kosovo.

0%5%

10%15%20%25%30%35%40%45%50%

Banks In person (bymigrant or

friend)

Moneytransferagencies

(MTA)

Credit/debitcards

Post office

47.6%

30.2%

18.9%

1.7% 1.6%


54

Koso

vo R

emitt

ance

Stu

dy 2

012

Table 5.5 Remitters’ share of income sent to Kosovo

Remitters’ share of income sent to Kosovo

Percent of remitters

Less than 10% 48.7%11-20% 34.8%21-30% 10.6%31-40% 3.1%41-50% 2.8%Total 100%

The share of remitters investing and saving in Kosovo is drastically lower than the share of those who remit, 35.7% and 20.4% of emi-grants respectively. In addition, the share of in-come that emigrants report to invest in Koso-vo is higher than the share of income they save in their homeland. The largest share of emi-grants (who report to invest in Kosovo) invest between 10 and 25% of their total household income on average. On the other hand, more than half of emigrants who reported to save in Kosovo claimed they save less than 10% of their total household income in Kosovan banks.

Table 5.6 Remitters’ share of income saved and invested in Kosovo

Share of remitters’ household income

Percent of remitters saving in Kosovo

Percent of remitters

investing in Kosovo

None 79.7% 64.3%Less than 10% 13.6% 10.8%10-25% 4.6% 19.7%25-50% 1.8% 4.6%Above 50% 0.4% 0.6%Total 100% 100%

As may be observed in the graph below, the largest share of remitters’ investments con-sist of real estate purchase for personal use (59.8%), family businesses (23.3%), real estate purchase for rent/resale purposes (7.1%), and establishment of service operations (5.6%). The graph below also shows that investments in the manufacturing sector are unattractive among emigrants, as none reported to have made capital investments in Kosovo. 31

31 International Agency for Source Country Information (IASCI) found that the preferred sectors of remittance recipient households in Kosovo are slightly different from KRHS 2011 data: retail trade 42%, agriculture 33% and real estate 4% (IASCI, 2010, p.7)

0%

10%

20%

30%

40%

50%

60%

Real estatepurchase

(personal use)

Family business Real estatepurchase

(rent/resale)

Service sector Manufacturingsector

Non-profitablecommunity

projects

59.8%

23.3%

7.1% 5.6%0% 0%

Figure 5.6 Remitters’ key investment areas in Kosovo


55

Koso

vo R

emitt

ance

Stu

dy 2

012

According to the OECD Investment Re-form Index 2010 for South East Europe, some of the key reasons for low investment (espe-cially in the form of FDI) in Kosovo include:

Kosovo’s lack of sufficient and adequate in-vestment promotion and facilitation, weak law enforcement and administrative capacity, lack of continuing education and training, lack of proactive export promotion, and limited access to finance. OECD ranks Kosovo low-est within the group of South-East European countries (including Albania, Bosnia and Her-zegovina, Bulgaria, Croatia, Moldova, Monte-negro, Romania, and Serbia) in most of the indicators mentioned above (OECD, 2011).

To understand remitters’ motives to invest in Kosovo, they were asked to rank their main reasons for doing so in Kosovo in terms of im-portance. As may be observed on the graph below, profitability, job creation and income generation for oneself are considered highly important among 49.5% and 62.3% of remit-ters respectively. Creating jobs and generating income for relatives is considered highly im-portant only among 24.1% of remitters invest-ing in Kosovo.

Even though the share of remitters investing in Kosovo is relatively small, less than 36%, remitters are rather positive about future in-vestment levels: 23.6% of remitters claimed they would invest more the next year, 20.6% claimed they would invest the same amount, whereas only 3.8% said they would invest less.

0% 10% 20% 30% 40% 50% 60% 70%

Profitability

Create jobs and income for oneself

Create jobs and income for relatives

Altruism/demonstrate commitment to thehomeland

49.5%

62.3%

24.1%

27.1%

25.6%

19.4%

36.1%

31.3%

24.0%

18.3%

39.8%

41.7%

Low Neutral High


Figure 5.7 Remitters’ main reasons to invest in Kosovo, by level of importance

56

Koso

vo R

emitt

ance

Stu

dy 2

012

5.4 Determinants of remitters’ investments in Kosovo

While the previous section provided key characteristics of remitters’ investments in Kosovo with regard to their type, amounts, and purposes, this section tries to explore the impact of demographic factors on remitters’ decisions to invest in Kosovo. The regression analysis controls for the following sets of vari-ables:

1. Remitters’ characteristics: age, gen-der, marital status, education, employment status, household size, average monthly income, number of years the household has been in the host country, whether the remitter has close family ties to Kosovo, host country (Germany, Switzerland, Italy, and Austria), whether the remitter saves in Kosovo, and amount of cash remittances sent to Kosovo;

2. Recipient’ characteristics: residence.

As Table A18 in Appendix I shows, only the following variables have a statistically signif-icant correlation with remitters’ probability to invest in Kosovo. Specifically:

- Remitters’ household size is positively correlated with the likelihood to invest. In other words, the likelihood that the emi-grant will invest in Kosovo increases with each additional member in his/her house-hold;

- Emigrants residing in Austria or Ita-ly have a higher likelihood of investing in Kosovo, possibly because of geographical proximity of these two countries to Kosovo;

- Likelihood of investing in Kosovo also increases with an increase in duration of stay in the host country. In other words, remitters who have been settled in the host countries for a longer period have a higher probability of investing in Kosovo;

- Likelihood of investing in Kosovo also increases with the average amount of cash remittances sent to households, i.e. emi-grants sending higher shares of remittances back to their families have a higher prob-ability of investing in Kosovo;

- Saving in Kosovo is also positively cor-related with investing in Kosovo;

- Finally, the probability of a remit-ter investing in Kosovo also increases if the recipient family resides in a rural area.

5.5 Remitter’ savings: Potential for Kosovo?

As discussed above, the majority of Kosovo emigrant households make between €1,500 and €4,000 per month or €18,000 to €48,000 per year. Given the average savings rate of 18%, a Kosovan emigrant household may save between €3,240 and €8,640 per year. This may not seem like a lot of savings, but the total fig-ure is rather substantial considering the large number of emigrants living abroad.

Here is a hypothetical example: assume that the average amount of savings for a Koso-van emigrant household living abroad is about €5,940 per year. Assuming that half, 50,000 emigrant households keep their savings in Kosovan banks results in approximately € 297 million.

So, if these savings were to be channelled to lucrative investment activities they would certainly help stimulating Kosovo’s economic growth.


57

Koso

vo R

emitt

ance

Stu

dy 2

012

Chapter 6: Recommendations

The analyses and findings of this report speak clearly about the importance of remit-tances for Kosovans’ wellbeing. Considering the close bonds to Kosovo despite the many years spent in migration, as well as the sav-ings and investment behaviour of emigrants, Kosovo’s long-term development prospects are closely linked with promoting policies that leverage the potential of remittances and emi-grant savings toward local economic activities.

Based on the report findings and data limi-tations, this report recommends further, more in-depth research on the following:

1. Education and employment/professional profile of emigrants.

Chapter 2 of the KRS 2012 provides three key insights on Kosovan emigrant base: 1) A considerably higher share of emigrant female household heads (19%) have completed university or higher ed-ucation compared to both emigrant men (9.1%) and household heads residing in Kosovo (10.5%); 2) The gap in educa-tion attainment between emigrant men and women adults is smaller compared to that in Kosovo, or 0.5 years on aver-age compared to 1; and 3) The majority (93.8%) of emigrant household heads are employed and gender differences in employment are small.

Although this information hints to the potential for knowledge transfer to Kosovo, this report recommends fur-ther, more in-depth research of educa-tion attainment and especially profes-sional/occupational profiles of both first and second generation emigrants, for

an assessment of brain circulation and knowledge and skill transfer potential. Furthermore, the abovementioned re-sults speak of a need to further study the determinants of such enviable outcomes for Kosovans living abroad, and explore ways in which appropriate policies in Kosovo could act in a similar fashion.

2. Impact of remittances on re-cipients’ human development and la-bour supply over time. By comparing remittance recipient and non-recipient households, KRS 2012 showed that re-mittances have improved the living standards of recipients by increasing their income, especially their nutrition and housing conditions, as well as earn-ing potential of the younger generations (through higher expenditure on human capital). Simultaneously, the regression analysis of Chapter 4 found that remit-tances affect negatively the labour sup-ply of recipients, especially by reducing their willingness to look for work when unemployed.

Although these results are statisti-cally significant, a more enduring effect of remittances on recipients needs to be studied over a longer period of time and “isolated” from other factors - by measuring the changes in consumption, education and labour supply behaviour of recipients as the amounts of remit-tances fluctuate - in order to inform pol-icy-making that maximizes the impact of remittances on human development. Developing a better grasp of the so-called “spoil-effect”, especially in light of the fact that 25% of Kosovo’s popula-tion is a remittance recipient, remains a

CHAPTER 6: RECOMMENDATIONS

58

Koso

vo R

emitt

ance

Stu

dy 2

012


critical area for further policy-oriented research, particularly because govern-ment efforts – now and in the future – to generate employment are likely to lack in maximum effectiveness if done in iso-lation and without considering the im-pact of remittances on the proclivity to seek a job.

3. Emigrants’ investments to Kosovo.

As discussed in the report, remit-tance flows to Kosovo mainly finance basic consumption of recipients. The majority of emigrants (94.4%) report to transfer remittances to support their families and relatives in Kosovo, where-as only 2.4% claim they send remit-tances to save them in banks in Kosovo, invest in family business or lend to fam-ily and friends. The share of remitters investing in Kosovo is only 35.7%, and the majority of their investments consist of real estate purchases for personal use (59.8%) and family businesses (23.3%). Establishment of service operations amounts to 5.6% of total investments, while investments in the manufacturing sector are inexistent.

Therefore, this report recommends that emigrants’ reasons and motives for limited investment in Kosovo, as well as their potential main sectors of in-terest in the future are explored more thoroughly, especially from a policy perspective i.e. what local authorities in Kosovo could do to attract such sav-ings. Coupled with information on emi-grants’ education and employment pro-files, such information would enable the related stakeholders to pinpoint exact incentives that would make investing (in certain sectors) in Kosovo attractive for the Diaspora.

Finally, since the existing literature on migration and remittances in Kosovo lacks analyses that distinguish between and compare the behaviour of migrant workers and emigrants and impact of their remittances, a more general rec-ommendation of this report is that any future research incorporates this com-ponent.

The following section presents rec-ommendations for the government and private sector:

1. Promote and create incen-tives for investments, especially in partnership with local government.

KRS 2012 findings demonstrate that not only do emigrants show a low pro-pensity to invest in Kosovo (despite high household income in host countries), but also a very small share of remittances is invested in productive activities by re-cipients. Purchase of land (0.8%); busi-ness start-up or acquisition (0.9%); and purchase of productive assets (2.2%) represent the only categories of remit-tance investments. A similarly low share of in-kind remittances consists of provi-sion of machinery (e.g. tractors, com-bines) (5%) and purchase of land (3%). Remittances also seem to have a limited impact on stimulating entrepreneurship initiatives among recipients: the share of self-employed remittance recipient household heads (2%) is even lower than that of non-recipients (3.3%).

Therefore, this report recommends that government policies include incen-tives for both emigrants and remittance recipients to direct remittances to pro-ductive/entrepreneurial activity invest-ments.

59

Koso

vo R

emitt

ance

Stu

dy 2

012


For instance, the government should direct more resources to increase the ca-pacities with the Ministry of Trade and Industry, Ministry of Diaspora, Min-istry of Economic Development and other relevant actors to bring together emigrants, remittance recipients, entre-preneurs, and local governments to ex-plore opportunities of joint partnerships (especially at local level). Such efforts would include, but not be limited to: - Promotion of financial literacy across the largest remittance recipient regions in order to increase access of remit-tance recipients to financial services; - Exploration of business (production, services, and others) opportunities in dif-ferent territorial units of Kosovo and col-lection of related business ideas and plans; - Promotion of the aforementioned business ideas/plans to emigrants by or-ganizing business fairs during peak pe-riods of Diaspora tourism

Such events would bring together emigrants, entrepreneurs with elabo-rate business plans lacking finan-cial means to start-up businesses, remittance recipients, and other re-lated financial and government actors; - Establishment of local development funds that enable partnering of local and central government (as guarantors) with emigrants for business start-ups or other projects at community level; - Simplification of business start-up procedures for emigrants; Enable emigrants to complete business start-up paperwork online

- Informing emigrants about invest-ment conditions and opportunities in Kosovo, business start-up proce-dures and financing and legal matters

related to investments through In-ternet and other electronic media; The related portals could also be used to enable emigrants to make online donations to local community development projects

- Provision of continuous admin-istrative support to joint emi-grant-resident business initiatives; - Organization of business and cultural fairs in cooperation with Non-govern-mental Organizations (NGOs) in host countries to promote Kosovan products, especially the agro-processed ones; and - Creation of a database containing information on residence, legal status, education level and profession of emi-grants to facilitate knowledge, technol-ogy and skill transfer programmes to Kosovo.

2. Lower remittance transfer costs, especially for the top host countries, Germany and Switzerland.

According to KRHS 2011 data, al-though a high share of both recipi-ents (78%) and remitters (91.3%) pos-sess bank accounts, slightly more than half, 57.2% of remittances are received through formal channels (banks, credit/debit cards, Money Transfer Agencies, or post offices). Although this figure denotes an increase since year 2010, utilization of formal transfer channels remains low mainly because of high transfer costs, as reported by 55% of respondents. An overwhelming major-ity of respondents (70%) claimed that they would use formal transfer channels when asked what channels they would prefer if all costs were the same.

60

Koso

vo R

emitt

ance

Stu

dy 2

012

Therefore, a decrease in remittance transfer costs (for example by linking financial institutions in Kosovo to main host countries or introducing tailored services such as the Internet, “Joint Ac-count System”32 or dual cards) would not only improve evidence-based poli-cymaking on remittances as a result of increased formalization of flows but also increase the financial literacy of both re-cipients and emigrants as they have ac-cess to other financial services of banks.

32 “Joint Account Systems” allow the remitter to directly deposit funds into recipients’ bank account.


61

Koso

vo R

emitt

ance

Stu

dy 2

012

ReferencesAcosta, P. 2006. “Labour supply, school attendance and remittances from international migration: The case of El Salvador”. Policy Research Working Paper No. 3903. Washington DC: World Bank

Adams, R. H. 1991. “The effects of international remittances on poverty, inequality and de-velopment in rural Egypt”. Research Report 86, International Food Policy Research Institute. Available from http://www.ifpri.org/sites/default/files/publications/rr86.pdf

_____. 1993. “The economic and demographic determinants of international migration in rural Egypt”. Journal of Development Studies, Volume 30, Issue 1, 1993.

_____. 2004. “Remittances and poverty in Guatemala”. Washington D.C.: World Bank Available from http://www-wds.worldbank.org/servlet/WDSContentServer/WDSP/IB/2004/10/19/000012009_20041019140801/additional/124524322_20041117160049.pdf

_____. 2006. “Remittances, poverty and investment in Guatemala” in International Migration, Remittances and the Brain Drain, edited by Ç. Özden and M. Schiff. Washington D.C.: World Bank. Available from http://siteresources.worldbank.org/INTINTERNATIONAL/Resourc-es/1572846-1155572147157/whole_book.pdf

Ahoure,E. “Transferts, gouvernance et développement économique dans les pays de l’Afrique sub-saharienne”. Paper presented at African Migrations Workshop, Rabat, Morocco, 26-29 November 2008

Amuedo-Dorantes, C. & Pozo, S. 2006. “Remittance income volatility and labour supply in Mexico”. Available from http://siteresources.worldbank.org/INTTRADERESEARCH/Resourc-es/544824-1323963330969/8322197-1323963851674/Amuedo-Dorantes_Pozo.pdf

Barham, B. & Boucher, S. 1995. “Migration, remittances and inequality: Estimating the net effects of migration on income distribution”. Madison, Wisconsin: University of Wisconsin-Madison Department of Agricultural and Applied Economics. Available from http://webarchive.ssrc.org/programs/intmigration/Topic_2_Barham_Boucher.pdf

Bislimi, F., & Kayhan, E. (2007). “The Spoil Effect: How remittances affect developing countries The case of Kosovo”. MPAID Second Year Policy Analysis. Cambridge: Harvard University, Kennedy School of Government

Bussolo, M., & Medvedev, D.2008. “Do remittances have a flip side? A general equilibrium analysis of remittances, labour supply responses, and policy options for Jamaica”. Washington DC: World Bank, Development Prospects Group. Available from

References

62

Koso

vo R

emitt

ance

Stu

dy 2

012

References

CBK (Central Bank of the Republic of Kosovo). 2011a. “Monthly Statistics Bulletin”. Available from http://www.bqk-kos.org/repository/docs/2011/MSB%20112.pdf

_____. 2011b. “Monthly Statistics Bulletin” Available from http://bqk-kos.org/repository/docs/2012/MSB%20no%20124.pdf

Córdova, A & Hiseky, J. 2009. “Migrant Networks and Democracy in Latin America”, Working paper, Vanderbilt University, 2009.

de Haas, H. 2009. “Mobility and Human Development”, Research Paper, No. 2009/01 (United Nations Development Programme, Human Development Reports, April 2009). Available from http://hdr.undp.org/en/reports/global/hdr2009/papers/HDRP_2009_01_rev.pdf

Docquier, F., Lohest, O., & Marfouk, A. 2007. “Brain Drain in Developing Countries”. World Bank Economic Review, 21(2), 193-218. doi: 10.1093/wber/lhm008

ESI (European Stability Initiative). 2006. “Cutting the lifeline. Migration, families and the fu-ture of Kosovo. Available from http://www.esiweb.org/pdf/esi_document_id_80.pdf

Funkhouser, E. (1992). “Mass emigration, remittances and economic adjustment: The case of El Salvador in the 1980s”, in Immigration and the Workforce: Economic Consequences for the United States and Source Areas, George J. Borjas and Richard B. Freeman, eds.

GAP Institute for Advanced Studies. 2011. “Remittances from Afghanistan and their impact in Kosovo’s economy”. Policy Brief. Available from http://www.gapinstitute.org/repository/docs/RemittancesAFG.pdf

Gupta, S., Pattillo, C. & Wagh, S. 2007. “Impact of remittances on poverty and financial devel-opment in Sub-Saharan Africa”, IMF Working Paper, WP/07/38. Available from http://ces.univ-paris1.fr/membre/Poncet/Master2/Refpaper/RAKOTOMA-MONJY_ref_paper2.pdf

Havolli, S. 2010. “Determinants of remittances: The case of Kosovo”. Central Bank of the Republic of Kosovo, Working Paper No.3. Available from http://www.bqk-kos.org/repository/docs/2010/CBK_WP_no.3.pdf

International Agency for Source Country Information (IASCI). 2010. “Kosovo Market Analy-sis. Annex I: Household Analysis. Vienna International Monetary Fund (IMF). 2004. “Kosovo - Gearing policies towards growth”. Available from http://www.imf.org/external/pubs/ft/kosovo/2004/eng/111804.pdf

63

Koso

vo R

emitt

ance

Stu

dy 2

012

References

International Organization for Migration (IOM). 2004. “Profiling of irregular migrants and analysis of reintegration needs of potential returnees from Kosovo (Serbia and Montenegro), Albania and FYROM in Belgium, Italy, the United Kingdom, and Germany. Available from http://www.belgium.iom.int/HLWG/PDF/IOM%20research%20report_Profil-ing%20of%20irregular%20migrants.pdf

Kim, N. (2006). “The impact of remittances on labour supply: The case of Jamaica”. Washing-ton DC: World Bank. Policy Research Working Paper 4120.

Levitt, P. 1998. “Social Remittances: Migration driven local-level forms of cultural diffusion”. International Migration Review 32:926-948

Mora, J., & Taylor, E. J. 2003. “Determinants of migration, destination and sector choice: Disentangling individual, household and community effects”. World Bank: International Migration, remittances & the brain drain. Available from http://siteresources.worldbank.org/INTINTERNATIONAL/Resourc-es/1572846-1155572147157/whole_book.pdf

OECD (Organization for Economic Co-operation and Development). 2011. “Kosovo under UNSCR 1244/99, in Investment Reform Index, Monitoring Policies for Direct Investment in South-East Europe. Available from http://www.keepeek.com/Digital-Asset-Management/oecd/finance-and-invest-ment/investment-reform-index-2010/kosovo-under-unscr-1244-99_9789264079588-19-en

Riinvest Institute. 2007. Diaspora and migration policies. The study was prepared for Forum 2015 organized by Riinvest Institute. Available from http://www.riinvestinstitute.org/publikimet/pdf/50.pdf

KAS (Kosovo Agency of Statistics). 2009. “Results of the labour force survey 2009”. Available from http://esk.rks-gov.net/ENG/publikimet/doc_view/870-results-of-the-labour-force-survey-2009?tmpl=component&format=raw

_____. 2011. “Kosovo Government Accounts (2004-2010)”. Available from http://esk.rks-gov.net/ENG/publikimet/doc_view/989-kosovo-government-accounts-2004-2010?tmpl=component&format=raw

Shroff, K. 2009. “Impact of remittances on poverty in Mexico”, Working Paper. Prepared for the Global Citizenship Conference. (Yale College, May 2009). Available from http://www.econ.yale.edu/~granis/web/PovertyWpaper.pdf

Taylor, E., Mora, J., Adams, R. & Lopez-Feldman, A. 2005. “Remittances, inequality and pov-erty: Evidence from rural Mexico”. Davis, California: University of California, Department of Agricultural and Resource Economics. Available from http://arelibrary.ucdavis.edu/working_papers/files/05-003.pdf

64

Koso

vo R

emitt

ance

Stu

dy 2

012

References

UNDP (United Nations Development Programme) .2009. “Human Development Report 2009. Overcoming barriers: Human mobility and development”. Available from http://hdr.undp.org/en/media/HDR_2009_EN_Complete.pdf

UNDP (United Nations Development Programme) Kosovo. 2010a. “Kosovo Human Develop-ment Report 2010: Social Inclusion”. Available from http://hdr.undp.org/en/reports/national/europethecis/kosovo/NHDR_Koso-vo_2010_English.pdf

_____. 2010b. “Kosovo Remittance Study 2010”. Available from http://www.kosovo.undp.org/repository/docs/Final-english.pdf

UNDP (United Nations Development Programme) Europe and CIS, Office of the Senior Econ-omist. 2011. “Recent trends in remittances and migration flows in Europe and Central Asia: The best protection against economic crisis?” Available from http://europeandcis.undp.org/senioreconomist/show/065515FB-F203-1EE9-B5511CA5A95279B7

Vathi, Z. & Black, R. 2007. “ Migration and poverty reduction in Kosovo”. Available from http://94.126.106.9/r4d/PDF/Outputs/MigrationGlobPov/WP-C12.pdf

World Bank. 2011a. “Migration and Remittances Factbook 2011” Available from http://data.worldbank.org/data-catalog/migration-and-remittances

_____. 2011b. “Migration and Economic Development in Kosovo”. Available from http://siteresources.worldbank.org/INTKOSOVO/Resources/Migration_and_Economic_Development_in_Kosovo_WB_report.pdf

World Bank. 2012. World Development Indicators (WDI) database. Available from http://data.worldbank.org/indicator (accessed January 17, 2012)

Yang, D. & Martinez, C. 2005. “Remittances and poverty in migrants’ home areas: Evidence from the Philippines”. Available from http://www-personal.umich.edu/~claudiap/yangmartinez_poverty.pdf

Yang, D. 2009. “International Migration and Human Development”, Research Paper, No. 2009/29 (United Nations Development Programme, Human Development Reports, July 2009). Available from http://hdr.undp.org/en/reports/global/hdr2009/papers/HDRP_2009_29.pdf

65

Koso

vo R

emitt

ance

Stu

dy 2

012

Appendix I: Summary of Results

APPENDIX I: SUMMARY OF RESULTS

Source: S. Mohapatra, D. Ratha, A. Silwal (2011). “Outlook for remittance flows 2011-2013,” World Bank

Figure A1: Outlook for remittance flows to developing countries, 2011-13

2007 2008 2009 2010e 2011f 2012f 2013f$ billions All developing countries 278 325 308 325 349 375 404Europe and Central Asia 39 46 35 36 39 42 46

Latin America and Caribbean 63 64 57 58 63 68 74

Middle-East and North Africa 32 36 34 36 37 39 41South Asia 54 72 75 81 89 94 100Sub-Saharan Africa 19 22 21 22 23 24 26

LDCs (UN-classification) 17 23 24 26 28 31 33Low-Income countries 17 22 23 24 27 29 32Middle-income 262 303 285 300 321 345 372

World 385 444 417 440 468 499 536

Growth Rate (%) All developing coun-tries 22.9% 16.8% -5.4% 5.6% 7.3% 7.4% 7.9%

East Asia and Pacific 23.7% 20.3% 0.8% 7.4% 6.8% 8.0% 9.5%Europe and Central Asia 38.5% 16.5% -22.7% 1.3% 7.8% 9.4% 8.8%Latin America and Caribean 7.1% 2.3% -12.3% 1.7% 8.6% 9.3% 8.6%Middle-East and North Africa 21.5% 12.0% -6.8% 6.2% 3.4% 5.5% 5.6%South Asia 27.1% 32.6% 4.8% 8.2% 9.1% 5.8% 6.5%Sub-Saharan Africa 47.1% 16.0% -3.8% 5.5% 5.1% 5.9% 6.5%

LDCs (UN-classification) 22.9% 32.8% 5.2% 5.8% 10.9% 7.3% 6.8%Low-income contries 27.9% 32.5% 3.3% 6.9% 12.1% 8.2% 8.2%Middle-income 22.6% 15.8% -6.0% 5.5% 7.0% 7.4% 7.9%

World 21.1% 15.3% -5.9% 5.4% 6.4% 6.7% 7.3%

US 4.8%Total 100%

0%

10%

20%

30%

40%

50%

60%

70%

80%

Urban Rural

23.6%26.4%

76.4% 73.7%

Recipient

Non -recipient

Figure A2 Remittance receipt, by locale of residence

66

Koso

vo R

emitt

ance

Stu

dy 2

012


Table A1 Emigrant destination countries

Emigrant host countries Percent of emigrants

Afghanistan 0.6%

Saudi Arabia 0.2%

Australia 0.6%Austria 6.8%Belgium 3.9%Bosnia and Herzegovina 0.8%Canada 1.2%Czech Republic 0.3%Croatia 0.2%Denmark 0.2%Finland 0.9%France 4.2%Germany 31.3%Iceland 0.2%Iraq 0.2%Ireland 0.2%Italy 7.1%Montenegro 0.3%Netherlands 0.3%Norway 1.2%Russia 0.2%Slovenia 1.2%Sweden 2.6%Switzerland 27.9%UK 2.8%

US 4.8%Total 100%

Table A2 Marital status of emigrant and Kosovan household heads

Kosovan household heads Emigrant household heads

Married 87.6% 85.1%Not married 5.4% 11.0%Divorced 0.7% 1.6%Widowed 5.9% 1.4%

Cohabiting 0.4% 0.2%Total 100% 100%

67

Koso

vo R

emitt

ance

Stu

dy 2

012


Table A3 Education of emigrant and Kosovan household heads

Household heads Not completed pri-mary education Primary education Secondary

educationUniversity or higher

education

Emigrant household heads 7.2% 18.4% 65.5% 9.0%

Kosovan household heads 1.1% 19.6% 68.7% 10.5%

Note: Education for Kosovan household heads was provided in years of education completed, instead of education level reached. Education level cut-off points were set based in the old ed-ucation system whereby: Primary education = 8 years of education; Secondary education=12 years of education; University or higher education=16+ years of education.

Table A4 Employment sector of emigrant household heads, by gender

Employment sector Men Women AllPublic sector 18.1% 23.5% 18.9%Private sector: employee 71.1% 53.9% 68.6%Private sector: employer 3.1% 0.8% 2.8%Private sector: self-employed 1.9% 1.2% 1.8%Unemployed, not receiving social assistance 0.9% 2.4% 1.1%Unemployed, receiving social assistance 2.5% 7.3% 3.2%Non-permanent employment 0.8% 2.4% 1.1%Part time employment 0.4% 2.4% 0.7%Pensioner 1.2% 0.4% 1.9%Housewife 0% 5.5% 0.8%Total 100% 100% 100%

Table A5 Frequency of remittance transfers, as reported by recipients and senders

Frequency of remittance transfers Recipients SendersWeekly 0.3% 0.5%Monthly 26.2% 26.4%Quarterly 19.0% 25.5%Bi-annually 21.5% 20.0%Annually 24.5% 15.1%Other 8.5% 12.7%Total 100% 100%

68

Koso

vo R

emitt

ance

Stu

dy 2

012

Table A6 Emigrants’ length of stay in Kosovo during visits

Length of stay Percent of emigrantsLess than one week 1.4%Two weeks 30.7%Three weeks 30.9%One month 33.2%Two months 3.5%Three months 0.3%Total 100%

Table A7 Correlation analysis of individual and household variables with household heads’ plans to migrate in the near future

Plans to migrateMen -0.05*Age -0.08*Education of household head -0.09*Married -0.03*Employed -0.12*K-Albanian 0.03*K-Serb -0.06*Other ethnicity 0.03*Household size 0.03*Proportion of adult men in the household -0.02Proportion of adult women in the household 0.02Average education level of adult household members -0.1*Percent of adult members unemployed 0.12*Logarithm income (excluding remittances) per capita -0.1*Emigrant members 0.08*Receipt of remittances 0.09*Rural 0.03*Prishtinë/Priština 0.02Mitrovicë/Mitrovica -0.09*Prizren 0.02*Gjilan/Gnjilane 0.06*Pejë/Peć -0.01

Ferizaj/Uroševac -0.00

*Statistically significant at 0.05 level (2-tailed)


69

Koso

vo R

emitt

ance

Stu

dy 2

012

Table A8 Determinants of household heads’ plans to migrate

Dependent variable: Have plans to migrate Coefficient Standard error

Constant 1,92 (0,53)*

Household head characteristics

Men 0,04 0,12

Age -0,02 0,018

Squared age -0,0001 0,0002

Education level -0,06 (0,01)*

Married -0,21 0,12

Employed -0,5 (0,09)*

K-Albanian -0,016 0,12

K-Serb -0,24 0,18

Household characteristics

Household size 0,006 0,02

Average education level of adults -0,07 (0,019)*

Percent of unemployed adults 0,67 (0,14)*

Per capital income(logarithm) -0,2 (0,06)*

Emigrant family members 0,27 (0,12)*

Receive remittances 0,3 (0,13)*

Rural 0,12 0,08

Mitrovicë/Mitrovica -0,7 (0,13)*

Prizren -0,07 0,1

Gjilan/Gnjilane 0,34 (0,11)*

Number of observations 6,632

*Statistically significant at 0.05 level

Table A9 Relationship between recipient household heads and remitters

Relationship between recipient and remitter Women Men

Mother 4.8% 3.8%Father 6.5% 6.2%Husband 12.5% 0.0%

Wife 0.0% 0.6%

Brother 27.6% 43.0%Sister 10.8% 8.7%Son 24.2% 28.3%Daughter 6.5% 4.5%Uncle 1.4% 1.7%Aunt 1.1% 0.5%Cousin 1.7% 0.5%Friend 1.7% 1.0%Other 1.1% 1.4%

Total 100% 100%


70

Koso

vo R

emitt

ance

Stu

dy 2

012

Table A10 Household income sources, mean ratios

All households Recipient households

Non-recipient households

T-statistic (two-tailed)

Permanent employment 49.1% 40.3% 66.4% 17.9*

International remittances 21.1% 20.1% 0% -

Non-permanent employment 9.4% 8.5% 12.3% 4.45*

Self-employment 6.6% 6.7% 8.4% 2.4*

Internal remittances 4.5% 14.0% 1.4% 28.6*

Pensions 3.2% 3.9% 3.7% 0.29

Occasional/seasonal employment 2.1% 1.6% 2.9% 3.65*

Sale of agricultural products 1.9% 2.4% 2.2% 3.47*

Others 0.8% 1.5% 0.8% 0.84

Social assistance 0.7% 0.4% 1.0% 6.8*

Rent 0.4% 0.4% 0.4% 0.99

Informal work 0.2% 0% 0.3% 3.47*

Scholarships 0.1% 0.1% 0% 0.40

Humanitarian aid 0.1% 0% 0.1% 1.21

Housewife 0% 0% 0% 0.22

Total 100% 100% 100% 12.58*

*Statistically significant at 0.05 significance level

Table A11 Household expenditures across categories, mean ratios

Expenditure categories All households Recipient

householdsNon-recipient

householdsT-statistic (two-

tailed)

Food 40.0% 37.3% 40.8% 6.65*Housing 13.0% 14% 13.3% 2.96*Non-food 10.0% 9.7% 10.0% 2.62*Semi-durables 10.0% 9.4% 9.7% 2.36*Health 6.0% 6.5% 5.4% 5.87*Transportation 6.0% 6.4% 5.2% 6.86*Entertainment 5.0% 4.5% 4.3% 0.1Education 4.0% 4.4% 3.9% 2.44*Durables 3.0% 3.5% 2.5% 5.41*Debt repayment 2.0% 1.8% 2.2% 1.4Savings 1.0% 1.2% 1.3% 1.68Investments 1.0% 1.4% 1.2% 1.3Total 100% 100% 100% 4.4*

*Statistically significant at 0.05 significance level


71

Koso

vo R

emitt

ance

Stu

dy 2

012

Table A12 Use of remittances across consumption categories, mean ratios

Expenditure categories RatioCurrent consumption (food, clothing, services, utilities) 35.4%Other consumption (furniture, home appliances, cars, weddings, funerals, etc) 24.8%Housing investments (purchase/building of house/apartment, renovation of house/apart-ment) 19.6%

Human capital investment: (education (4.6%); healthcare (6%)) 10.6%Business investment (purchase of land (0.8%), business (0.9%), productive assets (2.2%) 3.9%Savings (bank, under mattress, lend to relatives/non-family members, other savings) 3.7%Debt repayment (acquired to depart/migrate, for other purposes) 2.0%Total 100%

Table A13 Households’ satisfaction with the socio-economic situation of their families

Recipient households Non-recipient householdsFood/Nutrition 91.1% 88.5%Housing 90.0% 87.4%Clothing 82.2% 83.3%Health 84.0% 85.0%Education 83.7% 84.5%Leisure 72.0% 73.2%Productive assets 66.0% 61.0%Overall family socio-economic situation 87.0% 85.0%

*Note: Percentages of respondents that rated their socio-economic situation as “very good” or “good/suitable”

Table A14 Employment sector of household heads, by receipt of remittances

Employment sector Recipients Non-recipientsPublic sector 27.0% 27.6%Private sector: employee 31.8% 42.0%Private sector: employer 1.6% 2.3%Private sector: self-employed 2.0% 3.3%Unemployed, not receiving social assistance 15.4% 8.6%Unemployed, receiving social assistance 3.9% 5.1%Non-permanent employment 0.5% 0.7%Part-time employment 0.6% 0.4%Pensioner 10.7% 5.8%Housewife/man 5.6% 3.6%Student 0.8% 0.6%Other 0.1% 0.2%Total 100% 100%


72

Koso

vo R

emitt

ance

Stu

dy 2

012

Table A15 Household heads’ major reasons for not seeking work, by remittance receipt

Reasons Recipients Non-recipientsHousehold/family responsibilities 25.5% 34%Attending school/training 3% 4.4%Health-related reasons/disability 22.1% 22.0%Awaiting retirement 12.8% 15.6%Expecting to return to former job 0.4% 0.5%Already found a job/arranged own business to start later - 0.4%Applied for jobs and waiting replies from employers 0.3% 0.6%Looked for work before and got tired of seeking 1.0% 3.6%Awaiting for the season to begin working - 0.2%Has not looked for work before 1.0% 1.8%Don’t know where to look for work or how to open own business 1.0% 0.4%No or low skills 0.3% 0.2%No prior working experience - 0.4%No need to work because of financial support from family 11.7% 2.4%Farmer 4.8% 2.2%Pensioner 16% 11.3%Total 100% 100%

Table A16 Correlation analysis of individual and household variables with inactive working age household members

Inactive working age household member

Men -0.31*Age 0.19*Education -0.35K-Albanian 0.08*K-Serb -0.12*Other ethnicity 0.02*Household size -0.02*Receipt of remittances 0.05*Number of years that household has been receiving remittances 0.04*Logarithm of monthly cash remittances 0.01Expectation of higher remittance levels in the future 0.07*Rural 0.016*Prishtinë/Priština 0.07*Mitrovicë/Mitrovica -0.0007Prizren -0.03*Gjilan/Gnjilane -0.07*Pejë/Peć 0.06*

Ferizaj/Uroševac -0.07*

*Statistically significant at 0.05 level (2-tailed)


73

Koso

vo R

emitt

ance

Stu

dy 2

012

Table A17 Impact of remittance receipt on unemployed adults not looking for work (aged 15-64)

Dependent variable: Unemployed not looking for work

Coefficient

Constant 4.84*Individual characteristicsAge -0.11*Squared age 0.002*Men -1.7*Education level -0.32*K-Albanian 0.20*K-Serb -1.19*Household characteristicsHousehold size -0.1*Receive remittances 0.17*Rural 0.11*Prishtinë/Priština 0.1Prizren -0.6*Gjilan/Gnjilane -0.7*Pejë/Peć -0.13*Ferizaj/Uroševac -0.99*

Number of observations 25,254

Table A18 Determinants of remitters’ invest-ments in Kosovo

Dependent variable: Investment in Kosovo

Coefficient

Constant -2.17*Remitters’ characteristicsMen -0.2Age 0.05Squared age -0.001Married -0.34Incomplete primary education -0.7Primary education 0.16Secondary education -0.21Employed 0.35Household size 0.2*Logarithm of household income -0.18Family in Kosovo -0.6Germany 0.44Switzerland -0.11Italy& Austria 1.5*Years in host country 0.001*Logarithm of cash remittances sent to Kosovo 0.68*

Save in Kosovo 0.86*

Kosovan households’ characteristics

Rural 0.55*

Number of observations 443

*Statistically significant at 0.05 level


74

Koso

vo R

emitt

ance

Stu

dy 2

012

Appendix II: Technical Note on Definition of Emigrants

APPENDIX II: TECHNICAL NOTE ON DEFINITION OF EMIGRANTS

The literature and different conventions and international organizations use several criteria to distinguish between emigrants and migrant workers including, but not limited to: citizenship, residence, place of birth, and duration and purpose of stay in the host country. Emigrants are commonly defined as individuals who migrate to a country with their families (or reunite later) with a purpose to stay. These individuals are settled in the host country for a longer period and possess a legal status of stay, such as citizenship or permit of permanent residence. Migrant workers/temporary migrants on the other hand typically migrate alone, for a shorter period of time (often less than a year), to cope with income shocks that they/their households left behind face.

Since the KRHS 2011 did not include questions on all the above-listed criteria, the following as-sumptions were used to distinguish emigrants from migrant workers:

1. Migration year prior to 2004.

Since KRHS 2011 did not ask migrant respondent about the legal status in the host coun-try, this cut-off point was selected based on the data of KRHS 2010. The results of the latter showed that the majority of migrants (88.1%) who migrated before year 2004 were either citizens or had a permit of residence in the host country. Specifically, 92.7% of Kosovans who had migrated before year 2004 reported to have citizenship; 80.6% a per-mit of residence; 67.9% a visa; and 55% reported to stay illegally in the host country.

2. Household size of three or more members

3. Bonds to Kosovo.

Since emigrants are defined to settle in the host countries, the second and third assump-tions ensure that the selection includes only migrants who reside with their nuclear fam-ilies in the host countries and whose relationship to Kosovan residents (to whom they transfer remittances) includes family members other than spouse and/or children and relatives.

KRHS 2011 data show that the majority of Kosovan migrants surveyed are indeed emigrants based on the criteria listed above: only 3% of migrant respondents whose nuclear family mem-bers reside in Kosovo report to have migrated in year 2004 or later and live in a household of less than 3 members. Since such a small sample is too small to conduct any statistically significant and robust analyses, the analyses and recommendations in this report focus solely on emigrants.

75

Koso

vo R

emitt

ance

Stu

dy 2

012

Appendix III: Survey Methodology

APPENDIX III: SURVEY METHODOLOGY Background and objectives

Kosovo Remittance Study 2010, commissioned by UNDP, USAID, and IMF together with the Central Bank of Kosovo, Ministry of Economy and Finance, and the Statistical Office of Kosovo, reveals that remittances play a crucial role in supporting the economy of Kosovo. The study presents a detailed examination of the role of remittances as a source of financial support to Kosovans by analysing the data collected from a survey of 4,000 households. It explores the re-cipient and non-recipient household profiles, their income and expenditures status. The report also looks at the flow and channels of remittances, their use, as well as effects of remittances on the recipient households.

The repetition of the survey in 2011 increased the information about the flow and use of remit-tances as well as provided a database that allows analysis of remittances over time. The survey for the Kosovo Remittance Study 2012 was repeated in July – August 2011, during the peak period of Diaspora visits to Kosovo. Eight thousand households in Kosovo and 656 emigrants who send remittances to them were interviewed. Interviews of emigrant households were conducted by phone.

Sampling

The survey was based on a representative sample for Kosovo-Albanian, Kosovo-Serb and other Kosovan residents. The generated sample includes 8,000 households. The stratification of the sampled population was based on ethnicity (Albanian, Serb and other minorities), and settle-ment (urban/rural areas). UBO Consulting used a screening question for selection of qualified respondents, targeting respondent household heads aged 18 or above.

Selection of interviewed households within the sample framework followed a random walk, starting from the settlement centre, down a main street and selecting every-third-house.

Sample design is assumed to cover the entire K-Albanian, K- Serbian, and K-others living in Kosovo, producing sampling quotas based on municipality and settlement estimates of popula-tion, maintaining probability proportionate to size (PPS).

The questionnaire

The questionnaire was redesigned in accordance with the requirements of the research objec-tives and based on the previously used questionnaire for the baseline study in 2010. Additional questions regarding transfer channels, the preferences of senders and receivers, the attitudes to-wards different money transfer instruments, as well as the willingness to invest in Kosovo, have been added with the purpose of further identifying and understanding emigrants’ reasoning behind their methods of transferring money to, and investing in Kosovo.

KOSOVO Remittance Report

76

Koso

vo R

emitt

ance

Stu

dy 2

012

.

Documents

KOSOVO Remittance Report 1 REMITTANCE 0 › content › dam › kosovo › docs › Remitances › ...Kosovo Remittance Study 2012 Foreword It is widely recognized that the Kosovo