Should They Stay or Should They Go? A Simulation of Migrants’ Return to Kosovo and Spillover Effects on the Labour Market and Human Capital Investment

Using USAID’s and UNDP’s Remittance Survey (2010) this paper estimates the potential spillover effects of migrants’ return to Kosovo on the labour market and human capital investment. The model assumes two scenarios: low return 25% and high return 75% of migrants. Kosovan employees’ individual characteristics were used to predict the employment rates and wages of returned migrants. The counterfactual household income includes income generated from returnees’ wages and excludes remittances from diaspora. This variable is then incorporated in the model of marginal propensity to spend on education which was estimated using demographic and financial characteristics of households as well as individual characteristics of the household head. Our simulation shows that low (25%) and high (75%) return of migrants in Kosovo would have positive spillover effects on the labour market and investment in human capital. The predicted returnee employment rates and wages are higher than those of resident employees, increasing the level of total income of migrant households and therefore, expenditure on education.