Youth Self-Employment in Households Receiving Remittances in Macedonia

The objective of this study is to investigate whether youth in households receiving remittances in Macedonia have a higher probability of establishing their own business. In addition, we investigated whether the effect of remittances on youth labour supply is homogenous across the genders and across ethnic and rural/urban divides. We used the DotM 2008 Remittance Survey and the instrumental variables approach to address the potential endogeneity of remittances with respect to the self-employment status. Two instrumental variables were used which affect remittances, but not the decision to be self-employed, except through remittances: a non-economic motive to migrate, and the existence of migrants’ network. Moreover, we overcome some of the deficiencies of the IV estimation by applying the Roodman’s conditional mixed-process (CMP) estimator. Results robustly suggest that youth in households which receive remittances have considerably larger probability of establishing their own business, ranging between 28% and 33%, compared to their non-youth non-receiving counterparts. The main policy recommendation is that the Macedonian government should start devising a strategy for channelling remitted money into more productive use, especially converting those funds into jobs for youth.