Remittances Impact on Youth Labour Supply: Evidence from Kyrgyzstan

Abstract

This research aims to investigate the impact of remittances from international migration on left- behind youth occupational choice. Labour supply choice of youth is grouped as employee, family contributing worker, own-account worker and unemployment. Labour supply is analysed both at the extensive margin – participation of youth labour across these occupational choices, and at the intensive margins – working hours within each occupational choices. The analysis use “Life in Kyrgyz Republic” survey cross-sectional data for 2011. To overcome endogeneity concerns instrumental variable approach is used. Given the multinomial dependent variable and discrete endogenous variable “conditional mixed process” estimation technique is applied. Empirical results show that remittances impact on left-behind youth in Kyrgyzstan is mainly reflected as labour substitution effect. Unlike findings of some previous studies, we did not find any strong evidence of remittance-dependency behavior of left behind youth. However, increase of likelihood for youth as family contributing worker does not necessarily imply increase of productivity of labour force. There is no sufficient evidence of the fact that return from migration as the job creating activities and efficient utilization of remittances for own-account works exist. Moreover, female youth are more inclined to family contributing works both at the extensive and intensive margins. Results are robust to inclusion of other variables on individual characteristics. Given these empirical evidences, priority for the youth employment policy should be a channeling remittances into productive use. Moreover, educational programs with the emphasis on female youth and special programs on youth entrepreneurship and access to financial resources will be important for youth self-employment activities.