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Labour Migration and Import Demand: The Impact of Remittance Inflows for The Case Of Tajikistan

  • Mirzosaid SultonovEmail author
Article

Abstract

Tajikistan is a low-income country with a small and open economy; it is highly dependent on imports and remittance inflows. The volume of imports and remittances that flow into the country has climbed steadily in the last 10 years, and the overall proportion of these imports and remittances in the economy has increased.

For remittances as a percentage of GDP, Tajikistan has been among the top remittance-receiving countries for the last seven years. The volume of remittance inflows is not very large compared with the other top remittance-receiving countries. In 2010, the total remittances that flowed into Tajikistan amounted to only $2.2 billion while 42 countries in the world had remittance inflows of more than $2.2 billion. However, relative to the small size of the Tajikistan economy, the amount of remittances is very large: as a percentage of GDP, the remittance inflows were 6.4% in 2002, 9.4% in 2003, 12.1% in 2004, and 20.8% in 2005; in 2006, 2007, and 2008, they were 36.1%, 45.5%, and as high as 49.3%, respectively; in 2009, the remittances decreased slightly to 35.1%, but then increased again to 40.0% in 2010 and 44.2% in 2011.

The huge inflow of remittances can be expected to affect all macro and microeconomic indicators of the country. This paper focuses on the impact of remittance inflows on imports in Tajikistan. Analysing empirical data and applying an econometric model to quarterly time series, the paper demonstrates the significant impacts of remittance inflows on imports. Imports are a macroeconomic variable very responsive to inflow of remittances. Remittance inflows as a source of foreign currency clearly affect imports. An increasing share of imports in the economy, while export share is decreasing, brings about a trade deficit, negatively affects GDP, and increases dependence on remittances and imports.

The relationship between remittances and imports is one of the main sources of disagreement about the net economic impact of remittances. Import of production goods promotes domestic production and import of consumption goods increases living standards. However, increase in imports of goods which can be produced domestically affects domestic production negatively. Furthermore, an increasing marginal propensity to import decreases the multiplier effect of remittances. This paper examines this relationship for the case of Tajikistan, and tries to derive policy implications for enhancement of positive impacts of remittances and decrease of dependency on them.

Key words

Remittances Imports Tajikistan 

JEL Classification

F16 F22 F24 F41 J61 

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Notes

Acknowledgement

I would like to express my sincere gratitude to my supervisor Professor Yoshii Masahiko (Kobe University) for his continuous support and guidance. I also want to thank Professor Akiko Sakanishi (Nara Prefectural University), Professor Terukazu Suruga (Kobe University) and other participants in the Labor Economics and Policy Session of the 11th International Conference of the Japan Economic Policy Association (JEPA) at Nagoya Gakuin University, for their valuable and constructive suggestions and remarks on improvement of this paper.

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Copyright information

© Japan Economic Policy Association (JEPA) 2013

Authors and Affiliations

  1. 1.Graduate School of EconomicsKobe UniversityKobe, Nada-kuJapan

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