An analysis of the labor market, international migration and remittances during transition: The case of Albania

This dissertation consists of four chapters exploring the transition dynamics of unemployment and migration of Albanian workers as well as the remittances sent by migrant workers to their households in Albania.;The first chapter analyzes the duration of unemployment for unemployed Albanian workers during the time period 2002–2004. Survival and hazards functions of unemployment duration are generated to understand the relationship between the duration of unemployment and personal characteristics and worker occupation. The study finds that more than a decade since the beginning of the transition to a free market economy, many workers still face long unemployment spells. In an effort to help policy-makers design policies that deal with unemployment, within-sample and out-of-sample predictions are generated. Moreover, the models developed here can be replicated with future data to make predictions about future unemployment spells.;The second chapter analyzes the impact of labor market performance on migration decision. It finds no evidence that labor market performance, as measured by the wage rate and the return to unobservable personal traits, affects the migration decision. Such conclusion may be the result of unrealistic assumptions of perfect labor mobility and perfect information implicitly assumed in the model. Moreover, given large wage differentials between Albania and neighboring countries, wage increases in Albania are not sufficient to entice changes in the decision to migrate. Therefore, the migration decision seem to go far beyond the labor market and included deep psychological and emotional factors associated with the long period of isolation under the communist dictatorship.;The third chapter summarizes the theoretical models and predictions regarding the motives for remittances and provides the basis for the empirical work done in the following chapter.;The final paper analyzes motives for migrants’ remittances during transition. Specifically, it analyzes whether remittances indicate repayment of the schooling costs, a desire to inherit assets, and/or whether remitters respond to adverse shocks experienced by recipient households. Unlike studies to date, this study uses a Maximum Likelihood specification that jointly analyzes the migration decision and the decision to remit in a contractual setting, while correcting for migrants’ self-selection. The study incorporates cultural elements, such as rights and responsibilities associated with being the youngest of siblings, burden-sharing etc. Our results show that highly educated migrants repay their schooling costs after a certain period of time. The evidence that migrants remit in order to maintain favor toward inheritance is weak at best. There is no evidence of any responses to adverse shocks. However, this does not exclude the possibility of altruism. In fact, the evidence of burden-sharing among migrant siblings points in that direction.