Could Remittances Shield Vulnerable Households In Transition Economies?
The objective of the paper isto provide quantitative estimatesof the effect of remittances onto vulnerability in the case of Macedonia. Transition economies remain large recipients of remittances in terms of the sizes of their economies. As such, remittances are likely to benefit poorer countries, not only by subsidizing or substituting income, but also by reducing household’s vulnerability in other meaningful ways, like by supporting health expenditures, improving school outcomes and reducing unemployment. To investigate this in a more rigorous way, we devise an index of social vulnerability for Macedonia, comprehending income poverty, unemployment of both spouses, single parents, as well conditions of impaired health, undernourishment, material deprivation and insufficient clothing. Remittances then are allowed to determine the index of vulnerability. We use the Remittances Survey 2012 for Macedonia and conditional mixed process (CMP) estimator. Results suggest that remittance-receiving households have, on average 6% higher probability to report zero-vulnerability, suggesting that they indeed could act as social protection. However, we document that remittances effect for vulnerability is mainly channeled through income-based indicators.
Keywords— Remittances, Vulnerability, Social Indicators.