remittances and human capital investment: evidence from albania ermira hoxha kalaj december 2010
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Data and MethodologyDiscussionsRegression results BackgroundTRANSCRIPT
Remittances and Human Capital Investment:
Evidence from Albania
Ermira Hoxha KalajDecember 2010
Data and Methodology Discussions
The growing importance of remittances
Remittances, funds received from migrants working abroad, have grown worldwide from $3 billion in 1975 to
$310 billion in 2007 (World Bank, 2008) are mainly used to meet basic subsistence
needs in developing countries are tangible indicators of transnational
economic links between sending and receiving countries
Regression resultsBackground
Data and Methodology DiscussionsRegression resultsBackground
Data and Methodology Discussions
Economic impacts of remittances (1)
positive
generate welfare gains
reduce poverty are relatively stable relax household
budget constraints
negative
may lead to currency depreciation
may create dependency
may be misused
Regression resultsBackground
Data and Methodology Discussions
Economic impacts of remittances (2) Research traditionally has focused on:
who sends and who receives remittances how much and how frequently whether they fuel further migration
Recent studies have examined remittances in relation to: poverty (Adams, 2004;Taylor et al., 2005) financial development (Aggarwal, Demirguc-
Kunt and Peria, 2006) growth (Chami et al., 2003; Solimano, 2003;
Giuliano and Ruiz-Arranz, 2005)
Research DesignBackground
Data and Methodology DiscussionsRegression resultsBackground
Source: Jimenez-Martín et al. (2007)
Fig. 2. Top 15 estimated remittance flows in the European Union
Data and Methodology DiscussionsRegression resultsBackground
Remittances in Albania In 2005, fourth-ranked in the world in terms of
share of emigrants in relation to population, with 27.5 percent of Albanians living abroad (World Bank, 2006)
In 2006, remittances were 13 percent of Albania’s GDP, exceeding by more than three times both the FDI and the total amount of development aid received by the country
Data and Methodology DiscussionsRegression resultsBackground
Remittances and educational attainmentHow does migration affect household investments in human capital?
Extra income from remittances may allow children to attend school for longer and delay entering the workforce
Migration may reduce the number of adult role models in the home and increase the demand on older children to assist in running and supporting the household
Empirical findings about the overall impact are ambiguous.
Data and Methodology DiscussionsRegression resultsBackground
Research questions
What is the effect of remittances on human capital investment in Albania?
Do children who live in migrant households complete more grades of school than other children?
Are there important differences based on gender or area of residence?
Data and Methodology DiscussionsRegression resultsBackground
Data Albanian Living Standard Measurement Survey
(LSMS) 2005 3,638 households and 17,302 individuals divided in four regions: Tirana, the capital, and then
Costal, Central, and Mountain remittances are defined as money received by
households in the 12 months prior to the survey in cash or in-kind from someone who is living abroad
contains data on the highest grade for all household members and current enrolment status for each member aged 6 to 24
Data and Methodology DiscussionsRegression resultsBackground
The model
whereho(t) is the baseline hazard of leaving school
after grade txi is a vector of covariates such as; child’s
characteristics, incomes, area of residence, mother schooling
β vector of parameters to be estimated
'exp*)()( 0 ixthth
Data and Methodology DiscussionsRegression resultsBackground
The Cox (1972) model
Assumes that:• covariates multiplicatively shift the baseline
hazard function• the baseline hazard is given no particular
parameterization and can be left unestimated• whatever the general shape of the hazard over
time, it is the same for everyone
Data and Methodology DiscussionsRegression resultsBackground
Rationale for using the Cox modelThe choice of the hazard model is to some extent unusual in modelling school attainment levels. However the number of “grades completed” does not correspond precisely with the calendar year it is possible to choose one of two outcomes for each individual
enrolled in schoolnot enrolled
Data and Methodology DiscussionsRegression resultsBackground
Dependent variable
Duration calculated from Analysis time: the highest grade completed by
the household members
Failure time: enrolment status if enrolled, the individual is considered “right
censored”, if not, “failed”
Data and Methodology DiscussionsRegression resultsBackground
Independent variables
Data and Methodology DiscussionsRegression resultsBackground
Regression results
Data and Methodology DiscussionsRegression resultsBackground0.
000.
250.
500.
751.
00
0 5 10 15analysis time
noremitt remitt
Kaplan-Meier survival estimates for urban areas
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noremitt remitt
Kaplan-Meier survival estimates for rural areas
Figure 3: Estimated survival functions in urban and rural areas, with and without remittances
Data and Methodology DiscussionsRegression resultsBackground
Figure 4: Estimated survival functions, by gender
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Male Female
Urban survival estimates
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Male Female
Rural survival estimates
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Figure 5: Estimated survival functions, by gender only for those households receiving remittances
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0 5 10 15analysis time
Male Female
Data and Methodology DiscussionsRegression resultsBackground
Findings the presence of remittances increases the hazard
of leaving school if compared to non-remittance receiving households by 19.6 percent
there is an important difference in school leaving behaviour between males and females; female status decreases the hazard of leaving school by 10.8 percent
Incomes net from remittances have a positive effect in lowering the hazard of leaving school
for household members living in urban areas the hazard of leaving school after a given grade is 11.3 percent lower than for those living in rural areas
Data and Methodology DiscussionsRegression resultsBackground
Discussions (1) males living in rural areas in remittance receiving
households have a higher probability of leaving school, because remittances fuel further migration rather than further
education at home households with migrants may invest remittances in
higher return activities that provide alternative avenues for skill formation and higher returns than staying in school
the absence of a household head leads to less parental control in the household, thus negatively affecting children’s school enrolment
Data and Methodology DiscussionsRegression resultsBackground
Discussions (2) females have a higher probability of staying
longer in school than do males, because they have less labour market opportunities and thus
face lower opportunity costs of attending school in patriarchal contexts, men are generally the
frontrunners of international migration (Stecklov et. al., 2008)
consistent with similar findings in other countries, there are rural and urban differences
in contrast with findings from comparable countries, mothers’ education does not effect the hazard of leaving school
Data and Methodology DiscussionsRegression resultsBackground
Thank you!Questions?