The Policy Report analyzes the impact that remittances and migration have on the poverty in Kosovo, in a hypothetical case, without remittances and migration. Along the other things, this report offers a set of policy recommendations that would ensure a long-term sustainability of this effect and channeling of the remittances in the benefit of the economic development.

This study estimated the impact of remittances and migration on poverty rates in the hypothetical case with no migration and remittances in Kosovo using data from the Household Budget Survey 2011. The study developed counterfactual consumption estimates for remittance recipient households through the use of econometric estimations to predict the consumption of households in the case of no remittances. A counterfactual scenario is constructed for the observed recipient households by using the estimated coefficients of the determinants of per adult equivalent annual consumption of the households that do not receive remittances from abroad. This estimation enabled us to compare the poverty rates, observed and predicted, in Kosovo and also across the regions. Due to the potential presence of selection bias, the paper uses a two-stage Heckman-type selection procedure which suggests that there is no selection bias. This means that the subsample of non-migrant households in Kosovo is randomly selected from the population.