Paper short abstract:

Is one dollar of remittance income equal to one dollar of any other source of income? If it is not, then migrant money transfers may cause behavioral changes at the household level, and their development impact can be huge. This paper tests the assumption of fungibility of income.

Paper long abstract:

Is one dollar of remittance income equal to one dollar of any other source of income? If it is not, then migrant money transfers may cause behavioral changes at the household level, and their development impact can be huge. According to the World Bank, Kyrgyzstan is the number three country in the world by its share of personal remittances in GDP (28.5% in 2019), which makes its economy highly dependent on the money transfers by its labor migrants. On the other hand, there are frequent claims in Kyrgyz media that remittances sent by migrants are often used to finance celebratory events, which are both numerous and expensive in relation to households' incomes. This paper tests the assumption of fungibility of income and explores whether there are significant differences in the patterns of spending remittance versus other sources of income by Kyrgyz households, using a dataset “Life in Kyrgyzstan” that covers 3,000 households over five years (2010 to 2013, 2016). The results indicate that remittance income and other income are in fact not fungible and thus, mental accounting matters. Besides, there are significant differences in how remittance income and other income are spent by families in Kyrgyzstan. Contrary to the optimistic view of remittances in the literature, households spend most of their remittance income budget on consumption goods. In addition, they spend more of their remittance income on celebrations, funerals, and rituals compared to income from other sources. The findings suggest that the massive remittance inflows into the country do not have a positive development impact that they potentially could.

Paper short abstract:

Remittances do not affect spending on human capital or basic goods in Tajikistan. The only category of goods for which the share of expenditures systematically increases with remittances is the conspicuous goods category. Remittances and local revenues cannot be considered as substitutes.

Paper long abstract:

Tajikistan between 2007 and 2011 was the country most dependent on remittances. Using survey data covering this period, I analyse the impact of remittances on household expenditures. I apply a Working-Leser model and I control for both individual heterogeneity using individual fixed effects and endogeneity using a set of instruments. I find that, in general, remittances do not affect spending on human capital or basic goods (including food). The only category of goods for which the share of expenditures systematically increases with remittances is the conspicuous goods category. I propose to use PCA to sort durable goods and separate the basic goods from the secondary goods. Depending on the total expenditures of the household, education and health spending change as well. These changes in consumption habits appear to be temporary: households with long-term migrants or with former migrants have no change in their consumption. Even though remittances are undoubtedly worthwhile in reducing poverty and thwarting emergencies, the paper suggests that they do not necessarily improve the long-term development of Tajikistani households. Therefore, I conclude that remittances and local revenues cannot be considered as substitutes.

Paper short abstract:

The aims are to identify factors affecting called NEET-youth and predicting risks of becoming NEET in Tajikistan, implementing econometric methods and artificial intelligence algorithms. It based on data 13.000 data on family, individual and institutional factors collected during 2014-2022.

Paper long abstract:

The aim of the paper is to identify factors affecting called NEET-youth (NEET- Not in Education, Employment, or Training) and predicting risks of becoming NEET in Tajikistan. It helps to answer the question why the level of youth unemployment is the highest in Tajikistan in the Post-Soviet countries.

Annually 120-150 thousand of young people leave or drop educational system to enter the labor market of Tajikistan, but only 25-35 percent of them are able to find job in Tajikistan, the rest part goes abroad or ends up in so-called economically inactive group - they form a category NEET, which is growing each year. Level of NEET is 35-40% in Tajikistan. Traditional methods for estimating of unemployment are weak particularly for developing countries with young population, where labor market is not able to create necessary number of productive jobs, though we have suggested new methodology for counting youth unemployment - NEET. NEET includes not only unemployed youth, but economically inactive as well. It is important for the cases when youth frequently switches between unemployment and inactivity states.

Implementing econometrical methods and algorithms of machine learning (artificial intelligence) we have tried to build models to predict risks of becoming NEET. We choose machine learning algorithms for multinomial dependent variable, and built models that based on given information predict whether a person is NEET or not, or show probability of becoming NEET. Also, in this paper we will check factors on importance, using feature importance tests.

And, models were built using big data from several large-scale quantitative data which were collected in Tajikistan during 2014-2022, including retrospective quantitative data on 2000 youth of Tajikistan from 2017, data on 5000 youth collected in 2018. Models will be updated by data of 6000 youth which is currently being collected.

Summarizing our findings, we came to conclusion that family and individual factors, like financial conditions of the family, education level of parents, migration, level of education, accessibility of jobs nearby have significant effect on youth employment. The role of gender is the highest.