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

differ‚ such as Kyrgyzstan vs. There are parallels with two similar Central Asian
economies‚ Tajikistan and Uzbekistan‚ which experience high levels of emigration.

5. RESULTS AND DISCUSSION
We first present the simple correlations between remittances as a share of GDP and
the unemployment rate‚ followed by our preferred regression analysis whereby we
control for other country specific factors that affect unemployment‚ and finally
discuss the differences between the two countries.

Correlation analysis
Table 2 reports the Pearson correlation coefficients between the remittances to GDP
ratio and the unemployment rate for each country‚ as well as for the pooled sample
(all years and countries) providing an initial sense of the direction and strength of
association in each case.

Table 2: Correlation between remittances (% GDP) and unemployment rate

Pearson r Pearson r Pearson r Pearson r Pearson r
(Overall) (Kyrgyzstan) (Moldova) (Nepal) (Tajikistan)
Remittances vs 0.148 -0.866 (p < 0.754 (p < 0.065 (n.s.) 0.639 (p =
unemployment (n.s.) 0.001) 0.001) 0.003)
Note: “n.s.” indicates not statistically significant (p > 0.05). Significant correlations
are in bold with p-values.

Looking at the overall sample‚ the correlation coefficient between unemployment and
remittances is +0.148‚ which does not reach statistical importance. This means that if one
looks at all four economies pooled across all years‚ there is no linear relation between the
two: the high remittance economies are no more likely to be high unemployment
economies than the low remittance economies. This alone suggests that remittances do
not have straightforward positive or negative effects on labor market outcomes.

The picture becomes much clearer when we look at the countries themselves.
In Kyrgyzstan‚ the negative correlation between remittances and unemployment is
very strong (r = -0.866) and statistically meaningful at the 0.1% level. The negative
sign therefore shows that the years when Kyrgyzstan's remittances ratio (% of GDP)
was higher were also years when Kyrgyzstan's unemployment rate was lower.
Kyrgyzstan has gone from having a remittance to GDP ratio of less than 2% in 2002
through to more than 30% in 2020 at the same time as reducing its unemployment rate
from 8% to 3%. This negative correlation is consistent with the idea that remittances
in Kyrgyzstan dampened unemployment or are correlated with improvements in labor
market conditions. This is understandable since waves of labor migration in the 2000s
to Russia and Kazakhstan would have reduced the number of job seekers in

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