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

Lorena Skufi, Meri Papavangjeli and Adam Gersl

No 2024/5, Working Papers IES from Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies

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.

Keywords: labor market; demographics; inflation; wage; remittances; feedback-loop (search for similar items in EconPapers)
JEL-codes: E24 E31 J11 J21 J31 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2024-01, Revised 2024-01
New Economics Papers: this item is included in nep-lma, nep-mig, nep-mon and nep-tra
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Persistent link: https://EconPapers.repec.org/RePEc:fau:wpaper:wp2024_05

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