Summary  

Georgia has experienced large-scale emigration since the period following the breakup of the former Soviet Union in 1991 and obtaining independence. There were several driving forces behind migration processes in Georgia: political and ethnic conflicts (and as sequence a substantial number of refugees) as well as economic motives due to deterioration of national economy (Gerber & Torosyan, 2013). Because of these processes, thousands of people emigrated from Georgia in a search of high-wage employment opportunities. According to National Statistics Office of Georgia, approximately 867.6 thousand of persons out-migrated from Georgia during the period of 1991-2005. Along with increase in international migration, remittance inflows into Georgian economy have boosted dramatically. In 2015, net remittances from abroad accounted for almost 1.5 billion US$ or 10.4% of GDP (OECD/CRRC-Georgia, 2017). Though remittances from international migration, in general, have positive macroeconomic effects, recent empirical findings suggest that high migration and remittances levels, may have a negative impact on the functioning of labor market as well.

In developing countries, the weak performance of labor markets is usually associated with high migration and remittances levels (Kim, 2007). It is well known from academic literature that international migration affects labor market performance in two-ways (Rodriguez & Tiongson, 2001). First, it reduces the labor force directly when potential participant of labor market migrates abroad. Second, the inflow of remittances can negatively influence the behavior of left-behinds. Thus, emigration and remittances could be among the factors that explain poor functioning of the labor market in Georgia (Berulava & Chikava, 2012).

Despite its importance the link between migration and the labor market behavior of left-behind households’ members remains relatively unstudied in Georgia. Moreover, the few studies that explore this relationship, don’t account for potential endogeneity between migration and labor market choices of left-behinds. Hence, the causal link between these two household choices is still undetermined. Another comparatively unexplored issue is the reasons of inactivity in migrant-sending households (in particular, we try to ascertain whether the inactivity is caused by income, substitution/housework or education effects). In this paper, on the basis of the Georgian Household Survey, we aim to fill these gaps through studying the effects of migration on labor market participation/inactivity decisions of left-behind family members. We account for potential endogeneity issue between migration and labor market behavior of left-behinds by employing instrumental variable (IV) estimation technique. We also explore the impacts of migration, differentiated by household status of international migrant on labor market participation/inactivity decisions of left-behinds.

This paper explores the existing interrelationships between migration and labor market outcomes of left-behind household members in Georgia. Based on the Georgian Household Survey, we tried to answer the questions that remained relatively unexplored in economic literature.

First, we employed IV-technique to establish causal link between migration and labor market outputs in Georgia. Our analysis has proved the hypothesis that migration and labor market decisions of left-behinds are jointly determined. The study results suggest the international migration is an important predictor of labor participation choices of non-migrants and that the effects of migration on labor market participation/inactivity decisions of left-behind family members differ substantially by gender of left-behinds and settlement type. For left-behind females, the effect of migration on their labor participation decisions is significant and has expected positive signs. Also, this impact to some extent is stronger for females living in urban areas as compared to females living in rural settlements.  However, according to the study results, having a migrant in a household increases probability of male’s participation in labor market in urban areas (in rural settlements this effect is not statistically significant). From the theoretical point of view this result can be explained by complementarity of performed functions by the migrant and left-behind male household member.

Second, we explored alternative reasons of inactivity among left-behind members in migrant-sending households. Specifically, the three effects are studied: the disincentive effects caused by additional non-labor income from remittances; substitution effect, which assumes performing a housework instead of participating in labor markets; and education effect which explains non-participation by engaging in higher education. Applying multinomial Probit model, we ascertained that disincentive effect of migration on labor participation of left-behind household members, is less likely to occur in Georgia. According to the findings of this study, in Georgia, migration affects inactivity of left-behinds mainly though substitution or education effects.

This study is focused only on the extensive margins of the effect of migration on labor market outcomes. Further research should be focused on the exploration of the intensive margins of the microeconomic effects of migration in Georgia. The impact of migration on the choice of employment types of left-behinds deserves further investigation as well. Also applying time-series or panel data can provide better understanding of the casual link between migration and labor market behavior of the left-behind household members.

FUNDING

This work was supported by Shota Rustaveli National Science Foundation (SRNFSF) [№ 217556, Migration, labor supply and school attainment: evidence from Georgia].