Page 86 - Azerbaijan State University of Economics

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

discouragement of the domestic labor force. Moreover‚ Carare et al. (2024) find that
remittances only partially offset the above negative effects: while remittances raise GDP-
growth‚ the net effect of emigration and remittances results in a very small negative
average effect on labor force participation. This effect is most pronounced for the
population cohort aged 15 to 24 years. This may indicate that the youth are more likely to
give up their job search or delay their entry into the labor market if a family member
abroad sends remittances. It correlates with evidence in Tunisia (Jardoui‚ 2020) and other
North African countries that younger workers prefer to wait for migration or live on
remittance income than accept less-skilled‚ poorly paid domestic jobs‚ which may raise
the youth unemployment rate in these countries as remittances grow.

In summary‚ most research suggests that remittances have mixed effects on labor
markets. Remittances may reduce poverty and jump-start economic activity‚
providing jobs that reduce unemployment in the short run. In contrast‚ remittances
may promote lower labor force participation (or reduced working hours) among
recipients‚ reflected in lower labor force participation‚ or higher unemployment‚ of
the donors. Whether or not the remittances fill the labor shortage opened by migration
depends on whether the positive or negative impact is larger. When remittances are
used for productive purposes that increase output and employment‚ the negative
impact of migration on labor supply can be compensated by its positive impact on
labor productivity. If remittances do not lead to more output‚ if they are consumed
instead of invested‚ or if they are used for leisure‚ then the shortage of labor may
persist or even increase (Böhme et al.‚ 2015). Whether this is the case or not‚ is an
empirical question‚ which we next try to answer for our target countries using recent
data and econometric analysis.

3. DATA AND METHODOLOGY
Data Sources and Variables
The analysis reported here is based on annual data from 2002 to 2024 for Kyrgyzstan
(KGZ)‚ Moldova (MDA)‚ Nepal (NPL) and Tajikistan (TJK) which have been
selected on the basis of their high levels of emigration and high levels of remittances
to GDP. These data were collected mainly from the World Bank's World Development
Indicators (World Bank‚ 2025)‚ although national data were used for recent years
where necessary.

Personal Remittances Received (% of GDP) is the total remittance inflow as a share
of GDP‚ and thus a measure of the importance of remittances for the economy. The
higher the ratio‚ the larger is the remittance economy. This is common for many
countries with substantial diaspora. Among the countries in our sample‚ the ratio
peaked in mid-2010s at over 40% in Tajikistan‚ one of the largest in the world‚ and

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