Page 87 - Azerbaijan State University of Economics

Fadai Mardanli Mehman, Vildan Zahidkizi Rizayeva: Do Remittances Compensate for the
Labor Market Gaps Created by Emigration?

remained around 45% in 2024. The ratio has been historically high in Kyrgyzstan and
Nepal‚ often 25-30% in the case of Nepal and above 30% in the case of Kyrgyzstan
(before 2015). The ratio was historically very high in Moldova (between 30 and 35%
in the mid-2000s)‚ and has remained high even if lower (15% more recently).

Unemployment Rate (% of labor force) refers to share of labor force that is
unemployed but actively seeking employment. For consistency across countries‚ we
use the International Labour Organization (ILO) modelled estimate (World Bank‚
2025). It is common to use the unemployment rate as a measure of labor market slack:
a higher unemployment rate suggests that labor resources are under-utilised relative
to the number of jobs available. On the other hand‚ low unemployment rates also
imply tighter conditions‚ or labor shortages. The alternate that involves changes in
unemployment rates is also found‚ especially in the case of high emigration. For
example‚ if emigration alleviates tightness in the labor market‚ unemployment may
decrease as emigration occurs (to the extent that decreased unemployment
corresponds to fewer job-seekers)‚ whereas if remittances dissuade participation in
the labor market‚ then non-participation or unemployment may increase among those
who did not emigrate. In any case‚ unemployment does not capture discouraged
workers who are no longer part of the labor force; we will interpret the results with
caution. In some countries official unemployment rates are very low (in the case of
Kyrgyzstan and Moldova 2-5% in official statistics) for definitional reasons and
because labor out-migration rates are high. In other countries (e.g.‚ Nepal‚ Tajikistan)
unemployment is high (10-12%) by official definitions.

We also collected qualitative data on labor force participation rates‚ demographic factors‚
and other contextual variables. For example‚ Tajikistan has a very low labor force
participation rate (~44% in recent years) (World Bank‚ 2024)‚ and thus a large share of
the working age population neither works nor actively seeks work. This may result from
discouragement or informal subsistence activities‚ which also can help explain the
unemployment data.

All figures (remittances‚ GDP‚ percentages) are annual. Since the sample is from 2002
to 2024‚ we can observe the evolution of the economy before and after large events
like the Great Recession of the 2008-09 global financial crisis (which caused an initial
dip in remittances and subsequent growth) and the COVID-19 shock of 2020 (which
stalled migration and remittances). To ensure we reflect recent trends‚ we include data
until 2024‚ for example‚ the 2022-2023 Central Asia inflow‚ driven by geopolitical
shifts and economic recovery. Data for each country is a time series. With data for
four countries we have a panel (pooled cross-section time series). Individual country
time series span ~19-22 years depending on what year the data is available from.

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