On 6 March 2015, Group for Legal and Political Studies held a Panel Discussion and released a Policy Report entitled ‘Remittances and Migration: Their impact on citizens’ welfare and economic development of Kosovo’. Considering the important role that remittances have in the welfare of the citizens and their tremendous role in the Kosovo’s economic development, it is of a high importance to discuss opportunities and mechanisms that will enable the channeling of remittances in the benefit of the sustainable economic development.

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.

Given the results of this study provide evidence on the positive effect of remittances and migration in reducing poverty in Kosovo, it is of high importance to ensure long-term sustainability of this effect. The impact of remittances on reducing poverty depends mainly on who receives remittances and how they are used. Hence, it is of the upmost importance that remittances are not used only to fund personal consumption but also are directed towards useful investments, ensuring the sustainable income generation of these households. This could be a potential way of maximizing the benefits of remittances whilst decreasing the dependence of households on remittances. Therefore, in order for the effect of remittances to be sustainable even in the long-run, the government must refine policy choices in an attempt to leverage remittances for economic and investment-led development. Moreover, it should assess carefully the poverty reduction strategies in accordance with the characteristics of the regions and/or targeted group of beneficiaries. In order to tackle persistently high levels of poverty, the government and development agencies should initiate and orient social transfers and development projects to the poorest regions, including those where remittances are less prevalent. The households that are supported financially by remittances should be encouraged to invest such funds in farming, entrepreneurial activities and/or education so to ensure long-term sustainability and to reduce remittance dependency in the long term. To access the Policy Report, please click here.

Panelists in attendance:

Mr. Valon Murati – Minister, Ministry of Diaspora;

Mr. Faton Topalli – Member of Assembly, LVV;

Mr. Arben Mustafa – Head of Economic Analysis and Financial Stability Department, Central Bank of Kosovo;

Mr. Hafiz Leka – Head of Division of Labour and Employment, Ministry of Labour and Social Welfare;

Ms. Arbëresha Loxha – Presenter of the Report, Group for Legal and Political Studies;

Mr. Dren Doli – Moderator, Group for Legal and Political Studies.

Venue: Orion Conference Centre

Str. ‘Rexhep Luci’, Prishtina, Kosovo