Academic journal article The European Journal of Comparative Economics

The Determinants of Actual Migration and the Role of Wages and Unemployment in Albania: An Empirical Analysis*

Academic journal article The European Journal of Comparative Economics

The Determinants of Actual Migration and the Role of Wages and Unemployment in Albania: An Empirical Analysis*

Article excerpt

Abstract

The paper explores the determinants of internal migration in Albania, adopting the Harris-Todaro approach to migration: an internal migration function is estimated using district wage and unemployment rate differentials. The aggregate level wages and unemployment, included in the migration equation, are retrieved from a first stage wage and unemployment equations, estimated controlling for personal characteristics. Moreover, in order to test the predictions of the human capital model of migration, the difference between migrants and non-migrants is emphasized in the estimation. The data source is the "Living Standard Measurement Survey for Albania" (2002), undertaken by the national Institute of Statistics and the World Bank jointly. The results reveal that both wage and unemployment differentials are important determinants of the propensity to migrate in Albania. This conclusion is further emphasized by noting that migrants gain substantially in terms of higher returns to individual characteristics after emigration.

JEL Classification: J61, J31, J64, P2

Keywords: Internal Migration, Wage, Unemployment, Transitional Economy

(ProQuest: ... denotes formulae omitted.)

1. Introduction

Albania is one of the economically least developed countries in Europe: after the collapse of the communist regime a substantial growth was achieved but poverty at the household level is still very high. A strong link exists between poverty and unemployment, i.e., the lack of employment is one of the main determinants of poverty: it is reported that more than half of the families with an unemployed household head are poor and the situation is particularly difficult in the rural districts. The registered unemployment rate was 14.5 percent for the 2001, which rises to 15.3 percent, when the standard definition of unemployed is extended to seasonal workers and discouraged workers (World Bank, 2003).

The high rates of unemployment and the severe poverty experienced by the household may have induced strong pressure toward migration. Albanians are the most inclined to leave their country among all citizens of transition countries. According to a study conducted by the International Organization for Migration (Stacher and Dobernig, 1997), in 1993 over half of Albanians were willing to move and more striking, a fifth of them permanently. Statistics are poor, partly due to the irregular nature of much of migration, but most rough estimates of migration suggest that at least 15% of the population lives abroad and 40 percent of the people have some relatives settled outside the borders of the country (UN, 2002). External migration is not the only pattern in Albania, as there is a high rate of internal migration as well. The most common form of internal migration is urbanization: the urban population has risen from 31.8% in 1970 to 42.0% in 2000 (UN, 2002); however, migration occurs also from the internal areas toward the coastal regions and from the north to the south, because economic conditions are less severe in the southern than in northern areas.

The lack of relevant household data, however, has constrained any attempt to analyse the process governing migration behaviour in Albania and its determinants. In fact, no structured household surveys were available prior the LSMS 2002, which is the data source for this research: this limitation prevented any worthwhile analysis of the Albanian experience. This research aims to fill the current gap in knowledge, providing a detailed analysis of wage and unemployment equations at individual micro level as well as examining the internal migration pattern.

The ultimate objective of the paper is two-fold. On the one hand it analyses internal migration at an aggregate district level, adopting the Harris-Todaro approach: an internal migration function is estimated using aggregate wage and unemployment rate differentials. The distinct feature of this work is that the district level variables are endogenously calculated from a first stage wage and employment equations: this is done to control for individual heterogeneity, in accordance with the human capital model in migration. …

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