Page 102 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.83, # 1, 2026, pp. 82-106

CONCLUSION
In many cases‚ large-scale emigration from developing countries may cause labor
market problems in the home country‚ such as so-called "labor market gaps": jobs that
cannot be filled due to the loss of emigrated workers. One important question is
whether remittances can fill these gaps. We examine the impact of remittances on the
labor market over the last twenty years within four remittance-dependent countries
(Kyrgyzstan‚ Moldova‚ Nepal and Tajikistan). Our estimation suggests that‚ whilst
remittances may support the economy‚ they are not sufficient to replace the loss of
labor in the economy caused by migration.

The only country where the impact of large rates of remittance flows on the labor
market can be said to be clearly positive (in terms of reduced unemployment) is
Kyrgyzstan. It appears that emigration in the case of Kyrgyzstan absorbed excess
labor supply and that remittances helped to stimulate enough economic activity to
employ those still left in Kyrgyzstan; where remittances do indeed seem to have
somewhat "filled the gap." Still‚ remittances did help to drive Kyrgyzstan into extreme
dependence on foreign income‚ and exclusion of many potential workers.

In the other two case studies‚ the more common outcomes are observed. In Nepal‚
unemployment was low‚ as it was before the boom in remittances. In Tajikistan and
Moldova‚ unemployment/high labour non-participation rates coincided with the spike in
remittances. This indicates that neither the 'pull' effect nor the vacancy effect materialised.
Rather‚ remittances appear to have loosened the domestic supply of labour. People
sometimes rejected undesirable jobs back home because they could afford it through
remittances. The labour market gap created by migration whether a surplus of youth‚
labour shortages among skilled workers or general underemployment was not bridged by
remittances. Instead‚ the income flows papered over the gaps‚ even as the structural
weaknesses remained dormant yet real.

These findings‚ from a macro or aggregate perspective‚ echo what has been said about
remittances in development economics in general: remittances are an important source
of household resilience and macroeconomic stability‚ but do not substitute structural
reform in weak labor markets (Ratha 2013). Remittances are used to increase
consumption and balance of payments. Millions of households also use remittances to
improve housing‚ education‚ and health outcomes with the additional income.
However‚ it does not replace the country's human capital. The country cannot simply
"import" development via remittances‚ and development in the country can only
happen when human capital is used.

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