The aim of the project is to explore the role of private transfers on poverty, inequality and self-employment in Macedonia, Bosnia and Herzegovina and Kosovo. Special attention is afforded to the recent financial crisis’ effect on these links, the differences between rural and urban households, households with different ethnic backgrounds and the age and gender differences of those designated the ‘head’ of a family. Surveys for each of the three economies were carried out via two household surveys, one before and one after the crisis, with the use of econometric techniques.

The analysis demonstrated that private transfers indeed reduce social disparities. They reduce poverty—families receive 2,000 euros more in remittances annually and are 5% less likely to fall into poverty, although it seems that the crisis halted this effect. It is also found that private transfers reduce income inequality, especially during the crisis; Gini coefficient in the survey of 2012 was 0.35, though it would be 0.38 if the families did not receive remittances. In addition, private transfers have a positive, although small effect on self-employment. Families receiving 2,000 euros annually in remittances are 1% more likely to start their own business.

These results, for the positive role of private transfers in reducing social disparities in Macedonia, were obtained at a time when economic researchers write increasingly about poverty and inequality, and when talks on inclusive growth topped the agenda of global policy makers within the World Bank, European Commission, etc.

Source and further information: RRPP