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Migration, Remittances, and Wage-Inflation Spillovers: The Case of Albania

Author

Listed:
  • Lorena Skufi

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Bank of Albania, Tirana, Albania)

  • Meri Papavangjeli

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic & Bank of Albania, Tirana, Albania)

  • Adam Gersl

    (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic)

Abstract

Motivated by migration phenomena and wage-inflation spillovers, we investigate the relationship between the two and the inflationary remittances built-in pressures. We establish a feedback loop between migration and inflation, and specify a simple dynamic model to identify the pass-through. Our empirical approach focuses on the wage Phillips Curve, price setting under monopolistic competition, and state space model for the natural unemployment rate. Our estimates suggest that overshooting inflation and tight labor market conditions increase wage-inflation sensitivity. A continuous decline of population by 1% leads to 98 basis points (BP) of inflation pressures in the short-run and 23 BP in the long-run. Remittances induce excessive pressures by 18 BP on inflation. Supportive schemes such as an older retirement age and higher labor force participation rate can partially mitigate inflationary.

Suggested Citation

  • Lorena Skufi & Meri Papavangjeli & Adam Gersl, 2024. "Migration, Remittances, and Wage-Inflation Spillovers: The Case of Albania," Working Papers IES 2024/5, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Jan 2024.
    • Handle: RePEc:fau:wpaper:wp2024_05
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    More about this item

    Keywords

    labor market; demographics; inflation; wage; remittances; feedback-loop;
    All these keywords.

    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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