Do Remittances Alter Labor Market Participation? A Study of Albania

During the last two decades, South-East European countries have experienced a large increase in the number of people migrating to more developed countries. With a large portion of their population abroad, these countries are highly dependent on remittances, which in the case of Albania far exceed Foreign Direct Investments. The paper focuses on the impact of remittances on the labor market participation using propensity score matching. Using household survey data for Albania, this paper relies on the matching approach for the identification. The nearest neighbor and kernel estimators are used to obtain the matching results. The vector of covariates includes information related to individual and households characteristics such as; age, gender, schooling, area of residence etc. In the model, household incomes are considered separately from remittances in order to identify whether income from remittances have the same effect as other types of household non-labor income in the decision of participating in the labor market.