Migration and Labour Choice in Albania Carlo Azzarri, World Bank Gero Carletto, World Bank Benjamin Davis, FAO Alberto Zezza, FAO ABCDE, Tirana, June 10-11, 2008

Outline Objectives Objectives Income structure in Albania Income structure in Albania Education, land and migration Education, land and migration Models Models Results Results Conclusions and policy implications Conclusions and policy implications

Objectives How does migration affect labor market participation and occupational choice? How does migration affect labor market participation and occupational choice? Is there a “gender issue”? Is there a “gender issue”? Labor disincentive: wait for men and income for women? Labor disincentive: wait for men and income for women?

Household income structure

Household income structure …cont’d

Characterizing migration Access to international migration (% of HHS)

Characterizing migration...cont’d ,000 International migrants ,000 International migrants Private transfers are widespread Private transfers are widespread Underestimation of migration and remittances size Underestimation of migration and remittances size Migrants:-from Coastal and Central Areas Migrants:-from Coastal and Central Areas -from poor families Temporary vs permanent migration Temporary vs permanent migration Greece vs further destinations Greece vs further destinations

Education, land, and migration assets Hypotheses: Education as main determinant of labor participation Education as main determinant of labor participation + education > white collar, off-farm + education > white collar, off-farm + land > on-farm job, but U-shaped + land > on-farm job, but U-shaped Migration: more investment and labour to self- employment and agriculture, but possible moral hazard problem Migration: more investment and labour to self- employment and agriculture, but possible moral hazard problem

Results – Participation Probit Education : positive and increasing for female Education : positive and increasing for female Agricultural land: positive for M&F, with decreasing marginal returns Agricultural land: positive for M&F, with decreasing marginal returns Relative deprivation: positive Relative deprivation: positive District level unemployment: lower participation District level unemployment: lower participation Own temp migration: strongly negative for men Own temp migration: strongly negative for men Mig. to Italy: disincentive effect for women (via remittances?) Mig. to Italy: disincentive effect for women (via remittances?)

Results – Occupational choice (MNL)/1 Women are least likely to participate in self employment activities, followed by wage employment, then on-farm labour. Women are least likely to participate in self employment activities, followed by wage employment, then on-farm labour. More children>higher likelihood of working in agriculture as opposed to wage work for men More children>higher likelihood of working in agriculture as opposed to wage work for men Married men are more likely to be salaried workers than farmers Married men are more likely to be salaried workers than farmers Married women tend to ‘get stuck’ on farm and are less likely to be engaged in wage employment Married women tend to ‘get stuck’ on farm and are less likely to be engaged in wage employment Education pulls women out of farming and into wage employment Education pulls women out of farming and into wage employment

Results – Occupational choice (MNL) /2 Agricultural assets: more on-farm, though this decreases with land size (reverse effect is found for land and age for females) Agricultural assets: more on-farm, though this decreases with land size (reverse effect is found for land and age for females) Individual temporary migration: more self-employment -particularly for younger individuals. Individual temporary migration: more self-employment -particularly for younger individuals. For women, previous migration experience leads to a higher likelihood of working in wage labour For women, previous migration experience leads to a higher likelihood of working in wage labour Permanent migration to Italy reduces the relative probability of being self-employed, and this effect increases with age. Permanent migration to Italy reduces the relative probability of being self-employed, and this effect increases with age.

MNL -Predicted probabilities-

Conclusions Farming is still the main livelihood of many Albanian households, heavily dependent on low- productivity agriculture. Farming is still the main livelihood of many Albanian households, heavily dependent on low- productivity agriculture. Diversified income strategies. Diversified income strategies. Migration is used as a mechanism to diversify economic activities to cope against risk and obtain liquidity and capital under credit and insurance market failures. Migration is used as a mechanism to diversify economic activities to cope against risk and obtain liquidity and capital under credit and insurance market failures.

Conclusions...cont’d Access to household and individual level assets affects individual labour participation and labour activity choices. Access to household and individual level assets affects individual labour participation and labour activity choices. Agricultural, migration and human capital assets have a differential impact across livelihood choices, which varies by gender and age. Agricultural, migration and human capital assets have a differential impact across livelihood choices, which varies by gender and age. For men the disincentive to labour participation is due to the wait-for-the-next-migration effect; for women it is linked to an income effect -via remittances- and/or a reallocation of time and occupations (at the household level). For men the disincentive to labour participation is due to the wait-for-the-next-migration effect; for women it is linked to an income effect -via remittances- and/or a reallocation of time and occupations (at the household level).

Policy implications Migration is crucial for the economic future of Albania, both in terms of financing economic development (as informal safety net), and in reducing excess labour supply and poverty. Migration is crucial for the economic future of Albania, both in terms of financing economic development (as informal safety net), and in reducing excess labour supply and poverty. Agriculture appears to be more of a survival strategy than part of a poverty exit strategy. Agriculture appears to be more of a survival strategy than part of a poverty exit strategy. Education may play a role in encouraging diversification out of agriculture, and in Albania this means promoting a relatively higher level of education, beyond the high school level. Education may play a role in encouraging diversification out of agriculture, and in Albania this means promoting a relatively higher level of education, beyond the high school level.

Policy implications...cont’d Agriculture and migration may be complements, if migration can help easing liquidity constraints or dealing with risk in some kinds of business at home. Agriculture and migration may be complements, if migration can help easing liquidity constraints or dealing with risk in some kinds of business at home. What future migration will be for household livelihood strategies is crucial for designing policies more effective in stimulating growth and reducing poverty. What future migration will be for household livelihood strategies is crucial for designing policies more effective in stimulating growth and reducing poverty. Future research is needed to detangle the direction of causality between migration and poverty. Future research is needed to detangle the direction of causality between migration and poverty.

Grazie! Grazie!