3rd LSEE Research Network Conference
Social Cohesion and Economic Governance
Skopje 2017
Simulation of a voucher policy for
improving the social condition of
individual remittance receivers in
Macedonia
Blagica Petreski
Despina Tumanoska
Finance Think – Economic Research and Policy Institute,
Skopje
Jorge Davalos
Universidad del Pacífico, Lima, Perú
Contents
Context - motivations
Research project and objectives
Data
Model and methodology
Research results
Policy relevance
Policy implications
Simulation
RV policy – results
Conclusions and recommendations
Context - motivations
Remittances and social vulnerability in Macedonia
Remittances
• Macedonia receives about 4% of its GDP cash remittances, per year
Poverty and social vulnerability remain high
• 21.5% at-risk-of-poverty rate in 2015
• Severe material deprivation rate is 40.7%
• Combined indicator, at-risk-of-poverty rate or social exclusion is 41.6%
Social policies
• Social assistance measures
• Active measures: Labor market interventions
Research
project and objectives
Section title
Main text
However,
• Remittances are not a part of the official regular surveys and policies
•the real social picture may be different
Therefore, the bold question is if remittances are those preventing social
unrest?
The objective of the research is
• To investigate if remittances serve an informal social protection for
household members left behind, and
• To devise and ex-ante simulate a policy instrument – Remittances’
Voucher (RV) – for transforming it into a formal social protection.
Section title
Data
•Main
Remittances
text
Survey 2008
• Compiled by a private company;
• Focused both on individual and household characteristics;
• 1211 households;
• 4173 individuals;
• more than 160 questions.
•N.B. No remittances’ data in standard surveys (HBS, SILC)
Sectionand
Model
titleMethodology
remit𝑖 = 𝛼10 + 𝑛𝑗=1 𝛽1𝑗 𝑍𝑖 + + 𝑛𝑗=1 𝛾1𝑗 𝑖𝑛𝑠𝑡𝑟𝑢𝑚𝑒𝑛𝑡𝑠𝑖 + 𝜀1𝑖
consumption𝑖 = 𝛼20 + 𝑛𝑗=1 𝛽2𝑗 𝑍𝑖 + 𝛾2 𝑟𝑒𝑚𝑖𝑡𝑖 + 𝜀2𝑖
consumption_health𝑖 = 𝛼30 + 𝑛𝑗=1 𝛽3𝑗 𝑍𝑖 + 𝛾3 𝑟𝑒𝑚𝑖𝑡𝑖 + 𝜀3𝑖
Pr⁡
(ℎ𝑒𝑎𝑙𝑡ℎ𝑖 ) = 𝛼40 + 𝑛𝑗=1 𝛽4𝑗 𝑍𝑖 + 𝛾4 𝑐𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛_ℎ𝑒𝑎𝑙𝑡ℎ𝑖 + 𝜀4𝑖
Pr⁡
(ℎ𝑜𝑢𝑠𝑒_𝑐𝑜𝑛𝑑𝑖𝑡𝑖𝑜𝑛𝑖 ) = 𝛼50 + 𝑛𝑗=1 𝛽5𝑗 𝑍𝑖 + 𝛾5 𝑐𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛𝑖 + 𝜀5𝑖
Pr⁡
(𝑚𝑎𝑡_𝑑𝑒𝑝𝑟𝑖𝑣𝑎𝑡𝑖𝑜𝑛𝑖 ) = 𝛼60 + 𝑛𝑗=1 𝛽6𝑗 𝑍𝑖 + 𝛾6 𝑐𝑜𝑛𝑠𝑢𝑚𝑝𝑡𝑖𝑜𝑛𝑖 + 𝜀6𝑖
(1)
(2)
(3)
(4)
(5)
(6)
Methodology
The six-stage system of equations (1)-(6) will be estimated through
Roodman’s (2011) conditional mixed-process (CMP) estimator utilizing
OLS for (1), (2), (3), and probit for (4)-(6).
Instruments
•Migration rates
•Non economic motive
•Wealth of the migrant
Research results
Variable
First-stage
regression
Dependent:
remittances
Remittances received
Consumption
Health consumption
Male
Age
Age squared
Albanian
Secondary ed.
Tertiary ed.
Married
Employed
Number of members per household
Share of dependents
Region
Employment opportunities
Instruments
Change in migrant’s wealth at destination
Non-economic motive to migrate
Migration rate per region
Second-stage
regression
Dependent:
consumption
(w/o health
consumption)
0.3756*
Third-stage
regression
Dependent:
health
consumption
Fourth-stage
regression
Dependent:
health
condition
Fifth-stage
regression
Dependent:
housing
condition
Sixth-stage
regression
Dependent:
share of leisure
consumption in
total cons.
0.0523*
0.0001
0.0004
0.0996
-0.0294
0.00
-0.0343
-0.5007***
-0.5799***
0.0773
0.0215
-0.0017
-0.1614
-0.0507**
-1.4017***
0.2803
0.0181
0.00
0.0486
-0.1019
-0.3853
-0.3784
-0.069
0.417***
-2.311***
0.039
0.5246
-0.0015*
-302.008
6.7193
-0.0679
817.5114*
573.3203
-136.181
0.9626
423.3863
-77.3181
2,120.9837**
-48.8587
2,856.81
-359.686
-75.0679
0.6599
1,756.4608***
-68.1462
1,191.9276**
1,367.4930***
224.5839
-445.1692***
1,304.76
221.0751***
5,646.8420***
12.4065
-0.0985
0.008
34.6174*
-49.4509*
0.8238
2.6049
-94.3491***
-46.4079***
280.3137**
0.72
243.5279**
-0.0907
0.014
0.0001
-0.4539*
-0.4935***
-0.5048**
0.0855
-0.5538***
0.0325
-0.0893
0.0071
0.6956
-415.736*
-1,454.5233***
26,519.0983***
1,282.51
3,429.62**
310.7386***
0.45
-1.9688
Constant
3,015
3,015
3,015
3,015
3015
3,015
Observations
Source: Authors’ estimates
Note: *, ** and *** denote significance at the 10, 5 and 1% level, respectively. Marginal effects reported. Estimates corrected for heteroskedasticity
through the feasible GLS procedure (Wooldridge, 2013, p.287).
Sectionrelevance
Policy
title
 Thetext
Main
government widely treats the problem of social vulnerability.
However, none of the measures include remittances as formal social
protection
To address the policy gap, we propose devising a
VOUCHER
for transforming remittances’ informal into formal role for social protection.
 Eligibility
individual who is unemployed (and hence has no labour income) and
who receives remittances through official channels.
 Benefits
Health insurance: a voucher from the government in the value of the
average consumption on health and medicines (about 250 MKD,
representing slightly more than 5% the average remittance);
Pension insurance: setting 6% of the remitted money on a pension
savings account with the third pillar of the pension system (voluntary
pension pillar).
Sectionimplications
Policy
title
Main
For
the
text
remittance receivers:
• It provides formal social protection;
• It may support receivers’ financial literacy;
• In the long run, it may bring more productive and healthier nation;
and extend the life expectancy.
For the government:
• It reduces the incidence of social vulnerability and exclusion;
•It may reduce the amount spent on social assistance;
•Better targeting of socially vulnerable people.
For the overall economy:
• It gives more accurate answer to the question how much money
from remittances enter the economy;
•It may increase savings;
•It may increase investment.
Section title
Simulation
Main text
 Ex ante simulation with hypothetical shocks;
 The simulation exercise will simulate:
Health voucher: we impose a shock in the magnitude of an increase
of health consumption through health consumption
Pension savings: we impose a shock in the magnitude of an reduced
consumption through total consumption
Both increased (health) consumption and reduced probability of illness will
then impact to social condition
Section
RV
policy
title
- results
Improvement in social indicators under different compositions of the Remittances’ Voucher
policy
Health insurance
provision (% of average
consumption for health)
Pension
savings
provision
Income poverty
4% of
remittances Health condition
Income poverty
8% of
remittances Health condition
Source: Authors’ calculations.
50%
0.0
1.1
0.6
1.1
150%
(1.3)
(1.2)
0.0
(1.2)
Conclusions
Section
title and Policy
recommandations
Main text
Conclusions
• Increasing remittances by about 2.000 denars,
• increases consumption by 751 denars, and
• the health consumption by 105 denars, which then
• reduces the probability of falling into a bad health condition by 16%.
• Health improved by about 0.5 percentage points due to the voucher,
on top of the effect of remittances themselves
Recommandation
• the government should introduce the Remittances’ Voucher policy in
the array of social policies as means of framing remittances into more
formal social protection.
Thank you!
This research work was carried out by :
With technical
and financial support from :
Under the PEP research and capacity building initiative for
“Policy Analysis on Growth and Employment” (PAGE)
The PEP-PAGE initiative is supported by the following donors: