When the Manna Comes from Abroad. Remittances and Youth Labour Market Behaviour in Albania

Using data from Albania, we examine the effect of received remittances on youth labor market participation. The identification strategy relies on the coexistence of formal and informal money transfer channels, used to envoy either monetary or in kind transfers, and exploits between regions variation as well as between households variation in the exogenously determined number of Money Transfer Operator and in the distance from the border. After controlling for the demographic composition and socio-economic status of the household, for individual specific characteristics and for regional variations, we find that, on average, remittances have different effects for men and women depending on the age group they belong to. Traditional neoclassical income e¤ect is found in the whole cohort of young people (15-24 years old) and for the sub-sample of very young people (15-18 years old). No effect is at work for people between 19 and 24. By the contrary, the finding that inactivity is lower for people aged between 25 and 33 years who receive money from relatives abroad, suggests that for this cohort remittances enhance entrepreneurship