Page 92 - Azerbaijan State University of Economics

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

Kyrgyzstan while remittances could themselves fund some employment. Kyrgyzstan
therefore exported much of its unemployment to Russia‚ and any cash remittances by
these workers may have allowed the non-migrant population in Kyrgyzstan to take up
the jobs that were vacated by the migrants‚ or start their own businesses.

Surprisingly‚ this correlation is strong and positive (r = +0.754) and statistically
meaningful in Moldova meaning that the years in which Moldovans remitted a higher
share of GDP also correspond to years with higher unemployment in the country.
Moldovan remittances peaked at ~31-34% of GDP in 2006-2007 with an unemployment
rate of ~6-7%‚ while in 2020 remittances fell to ~15% and unemployment to ~3-4%.
Since remittances and the unemployment rate are positively correlated‚ and have both
been in decline since 2008‚ remittances cannot be said to have been the direct cause of
improved Moldovan unemployment. The effect of the remittance shock correcting itself
may simply have arisen through a shrinking labor force (the Moldovan population and
labor force have both been in decline) or‚ perhaps‚ people simply giving up their search
for work. An alternative hypothesis is that during the high remittance years‚ it was optimal
for a portion of the local population to remain unemployed (or informally employed)‚ and
workers were willing to take the available jobs only once remittances went down‚ leading
to a drop in unemployment. Qualitatively‚ it has been noted that in Moldova‚ migration
and remittance flows contributed to labor shortages in some sectors‚ as well as to high
unemployment among people who were not or could not migrate (Kupets‚ 2012).
However‚ the Moldovan labor market is influenced by so many other factors‚ including
migration opportunities to the EU and domestic policies‚ that this cannot be counted as a
causal link.

In Nepal‚ however‚ no association was found (r ≈ +0.065‚ p = 0.43). Even as
remittances soared from ~2% of GDP in the early 1990s to ~25% to 30% in the 2010s‚
unemployment was remarkably stable (10% to 11% for decades). It seems the
additional income did not have much impact on the unemployment rate‚ as this is an
urban‚ educated rate‚ and most of the labor force is in the informal agricultural sector‚
and is either underemployed or has migrated to work abroad. Even in Nepal‚
remittances increased household income and decreased poverty‚ but did not change
labor demand or supply considerably (Pant‚ 2011). The remittances have not caused
a large withdrawal of labor supply from the measured labor force because the labor
force participation rate‚ particularly of women‚ is low‚ and cultural factors determine
labor force participation. Remittances have not considerably helped or harmed Nepal's
unemployment situation. The labour market wear and tear of millions of Nepalis
abroad‚ however‚ are reflected in other indices (eg‚ migrant workers from abroad fill
labour gaps in construction‚ agriculture or industry sectors or low female

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