recent trends and economic impact of emigration from latvia oecd/mfa conference riga, december 17,...

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Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for the Study of Labor (IZA)

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Page 1: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Recent trends and economic impactof emigration from Latvia

OECD/MFA Conference

Riga, December 17, 2012

Mihails Hazans

University

of LatviaInstitute for the Study of Labor (IZA)

Page 2: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Summary -1: The Exodus

• Since the beginning of the 21st century, Latvia has lost 9% of its population (including almost 14% of working-age population) in several waves of emigration

• The most recent wave is the strongest migration response to the economic crisis among the EU member states

Page 3: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Summary – 2 : A threat and a resource

• According to a recent (2012) survey, 77% of Latvia's population perceive emigration as the single largest threat to the country

• Yet potentially large economic benefits from investment, trade and transfer of skills can be derived with the help of Latvian Diasporas - directly or by fostering return

Page 4: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Summary - 3• Despite recovering economy, emigration

shows only weak signs of slowing down, while emigration potential remains high.

• Recent emigrants are more likely to move in full families and less likely to return.

• Lack of jobs and low earnings remain the leading reasons for emigration, yet non-economic reasons (uncertainty, general dissatisfaction, etc.) are gaining importance, especially among university graduates

Page 5: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Net emigration from Latvia, 2000-2011

Page 6: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Emigration and immigration (1000), 2000-2011:Top – CSB version; Bottom – corrected (CSB_Hazans)

Page 7: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Emigration may have slowed down from the 2010 peak, but has it slowed back down to the pre-crisis level?

Page 8: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Net emigration of Latvian nationals by destination, 2000-2011

Page 9: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Emigrants from Latvia (aged 22+) by completed education at the end of 2010 (relatives’ survey data)

Page 10: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Estimated percentiles of emigrants' last earnings from all jobs as proportion of median earnings of all legally employed persons in

the same month, 2005-2011

• Relative domestic productivity of the top half of emigrants with [legal] work experience was falling dyring the growth periods and rising during the recession brain drain risk is higher in the times of crisis

• Domestic legal earnings of most emigrants were below median

Page 11: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Latvian emigrants' plans to return within 6 months and within 5 years, 2011/01

Page 12: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Economic impact (1)• Emigration has contributed significantly to

decline in unemployment and NAIRU...• ...but also to emerging labour shortages (now

reported as limiting factor by 20% of construction enterprises and big manufacturing firms; elsewhere this rate is <10%);

• ...which certainly will become a serious challenge in the near future

• Emigration has a positive effect on real wages• Different approaches all indicate a significantly

negative long-term effect of emigration on Latvia’s GDP, but the size of the impact varies

Page 13: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Economic impact (2)• Estimated effect on GDP does not account for losing “the

key employees” on one hand and for lower than average domestic productivity of most emigrants on the other

• Remittances reduce negative effect on GDP by about 50%, but for how long?

• By reducing population and hence the domestic market size, emigration discourages investment - both foreign and domestic

• Economic theory and evidence from other countries suggest that FDI from and export to countries hosting recent LV emigrants could increase (yet to happen!)

• Should we see the Diasporas (rather than the host countries) as potential trade partners and FDI sources?

Page 14: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Emigration has contributed significantly to decline in unemployment and helped to contain social spending

• In 2005-2011, for 50 000 emigrants with labour market experience (31% of all such emigrants), the last registered economic activity was unemployment; in 2010-2011 this proportion was above 40%, and emigration directly reduced unemployment rate by at least 1 point.

• Emigration caused fall in U rate by 2.4 points in 2004-2008 (Barrel et al. 2007) and decline in NAIRU by 0.4 points in 2003-2010 (Zasova & Hazans).

Page 15: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Net emigration and job vacancy rate, by sector. 2005Q1-2012Q2

Page 16: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Thank you!

• [next slide compares emigration during 2000-2011 across the three Baltic countries –for discussion]

Page 17: Recent trends and economic impact of emigration from Latvia OECD/MFA Conference Riga, December 17, 2012 Mihails Hazans University of Latvia Institute for

Population change in the Baltics, 2000-2011 (% of the inititial population)