Migration and Labour Choice in Albania

1. 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

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

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

4. Household income structure

5. Household income structure …cont’d

6. Characterizing migration Access to international migration (% of HHS)

7. Characterizing migration ...cont’d • 600-800,000 International migrants 1990-2002 • Private transfers are widespread • Underestimation of migration and remittances size • Migrants: -from Coastal and Central Areas -from poor families • Temporary vs permanent migration • Greece vs further destinations

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

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

10. Results – Occupational choice (MNL)/1 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 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 Education pulls women out of farming and into wage employment

11. 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) • 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 • Permanent migration to Italy reduces the relative probability of being self-employed, and this effect increases with age.

12. MNL -Predicted probabilities-

13. Conclusions • Farming is still the main livelihood of many Albanian households, heavily dependent on low-productivity agriculture. • 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.

14. Conclusions ...cont’d • 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. • 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).

15. 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. • 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.

16. 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. • 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.

17. Grazie!