Emigration and remittances as a form of labour market adjustment – The case study of Macedonia
Emigration and remittances as a form of labour market adjustment – The case study of Macedonia

Summary/Abstract: The past two decades Macedonia has gone through the process of transition which is still shaping the social, political and economic ambience in the country. The initial transitional recession has inter alia manifested salient effects on the labour market performance. Macedonia is among rare countries, where the unemployment rate during the whole period of transition hovers above 30%. Even though there is some criticism regarding the accuracy of the Macedonian unemployment rate estimated by the Labour Force Survey, it is still evident that we are facing an odd phenomenon. By using the Keynesian terminology, the Macedonian labour market experiences a suboptimal equilibrium assumed as a state where significant part of resources are not utilised or underutilised. We argue that this suboptimal equilibrium to great extent is result of the alternative labour market adjustment mechanisms that mitigate the high and sustained unemployment. These mechanisms cushion the social implications of unemployment by absorbing a part of unemployed workforce and/or providing additional incomes for households that enables their basic subsistence. One form of adjustment mechanism among the unemployed workers is emigration and remittances that provides the necessary income support for the households. In this paper we make an attempt to identify the role of emigration and remittances as income support for unemployed workers. For this purpose we use results from the survey carried on a representative sample of registered unemployed workers in Macedonia. Furthermore, we estimate an econometric model that reveals the relevant factors that influence intention to emigrate. Finally, we formulate appropriate policy measures that target emigration and remittances in order to improve the labour market functioning and to provide the necessary conditions for balanced economic development.

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