THE EFFECT OF EDUCATION ON POVERTY IN KOSOVO AND ALBANIA ARBËRESHA LOXHA A ...

319 Pages·2017·3.53 MB·English

THE EFFECT OF EDUCATION ON POVERTY IN KOSOVO AND ALBANIA

ARBËRESHA LOXHA

A thesis submitted in partial fulfilment of the requirement of Staffordshire University
for the degree of Doctor of Philosophy

December, 2016
In the name of God, the Most Gracious, the Most-Merciful
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ACKNOWLEDGMENTS

First of all, I would like to express my sincere thanks to my principal supervisor, Dr. Mehtap
Hisarciklilar, for her support, thoughtful guidance as well as her dedication and patience on
the way to my PhD. I would also like to also warmly thank Dr. Jana Fiserova and Dr. Ardiana
Gashi, for their support and useful comments. Having their support helped me endure with
some of the most difficult stages of my research much easier. I am truly indebted to them all.
A warm gratitude also goes to Prof. Jean Mangan for her contribution during my early stages
of research before her retirement.

My studies in United Kingdom would not have been possible without financial support from
Open Society Institute and Staffordshire University to which I am also very thankful. Their
scholarship enabled me to face new academic challenges and grow academically but also
provided me with an opportunity to meet many new and interesting people some of which
have in the meantime become my good friends. My gratitude goes to my family and close
friends in Kosovo for their great support and encouragement throughout the time of my
research. Special thanks goes to my roommate, Arta Mulliqi, for the good times we had
together and her support over the last four years. I also thank the leadership of my home
Institution, Group for Legal and Political Studies for their continuous support, encouragement
and understanding.

I dedicate this thesis to my parents, for everything they have done to help me become who I
am today. Without their endless love, support and encouragement, I would never complete
this journey.
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TABLE OF CONTENTS

PREFACE ……………………………………………………………………………………1

CHAPTER 1
POVERTY DEFINITION AND MEASUREMENT
1.1 INTRODUCTION ............................................................................................................. 9
1.2 DEFINITION OF POVERTY ........................................................................................ 10
1.2.1 MONETARY APPROACH ................................................................................................................. 11
1.2.2 CAPABILITY APPROACH ................................................................................................................. 14
1.2.3 SOCIAL EXCLUSION ....................................................................................................................... 15
1.2.4 PARTICIPATORY APPROACH ............................................................................................................ 17
1.3 MONETARY MEASURES OF POVERTY ................................................................. 18
1.4 POVERTY MEASURES IN KOSOVO AND ALBANIA ............................................ 20
1.4.1 POVERTY MEASURES IN KOSOVO .................................................................................................... 20
1.4.2 POVERTY MEASURES IN ALBANIA .................................................................................................... 21
1.5 CONCLUSIONS .............................................................................................................. 23

CHAPTER 2
A REVIEW OF THEORETICAL AND EMPIRICAL STUDIES
2.1 INTRODUCTION ........................................................................................................... 25
2.2 EMPIRICAL REVIEW .................................................................................................. 26
2.2.1 THE DEPENDENT VARIABLE (POVERTY MEASURES) ............................................................................. 26
2.2.2 MODELLING THE HOUSEHOLD BEHAVIOUR ........................................................................................ 29
2.2.3 THE TREATMENT OF HOUSEHOLDS WITH DIFFERENT COMPOSITION ....................................................... 29
2.2.4 MODELLING ISSUES: ENDOGENEITY AND IMPLICATIONS OF INTERPRETING PRE-DETERMINED VARIABLES ...... 31
2.2.5 INDEPENDENT VARIABLES .............................................................................................................. 31
2.2.5.1 Education ......................................................................................................................... 32
2.2.5.2 Regional variations .......................................................................................................... 33
2.2.5.3 Migration ......................................................................................................................... 34
2.2.5.4 Other variables ................................................................................................................ 35
2.2.5.5 Results .............................................................................................................................. 40
2.3 THEORETICAL REVIEW ............................................................................................ 44
2.3.1 MEASUREMENT OF WELFARE ......................................................................................................... 45
2.3.2 A REVIEW OF THEORIES RELATED TO STRUCTURAL RELATIONSHIPS THAT AFFECT WELFARE/POVERTY ........... 50
2.3.2.1 Theories related to labour market decisions .................................................................... 50
2.3.2.2 Migration theory .............................................................................................................. 56
2.3.2.3 Theory of household fertility decisions ............................................................................ 62
2.4 CONCLUSIONS .............................................................................................................. 67

CHAPTER 3
POVERTY, EDUCATION, MIGRATION AND FERTILITY IN KOSOVO AND
ALBANIA
3.1 INTRODUCTION ........................................................................................................... 70
3.2.1 POVERTY IN KOSOVO AND ALBANIA ................................................................................................ 72
3.2.2 EDUCATION IN KOSOVO AND ALBANIA ............................................................................................ 77
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3.2.3 LABOUR MARKET IN KOSOVO AND ALBANIA ..................................................................................... 87
3.2.4 MIGRATION IN KOSOVO AND ALBANIA ............................................................................................ 91
3.2.5 DEMOGRAPHIC PROFILE OF KOSOVO AND ALBANIA ............................................................................ 95
3.3 DATA .............................................................................................................................. 101
3.4 DESCRIPTIVE ANALYSIS USING SURVEY DATA ............................................. 103
3.4.1 EDUCATION AND POVERTY ........................................................................................................... 103
3.4.2 REMITTANCES, POVERTY AND EDUCATION ...................................................................................... 106
3.4.3 POVERTY AND FERTILITY .............................................................................................................. 110
3.4.4 POVERTY, REMITTANCES AND MIGRATION IN FEMALE-HEADED HOUSEHOLDS ........................................ 112
3.4.5 POVERTY AND UNEMPLOYMENT ................................................................................................... 113
3.4.6 POVERTY ACCORDING TO ETHNICITY .............................................................................................. 114
3.4.7 POVERTY RATES AND POVERTY BY LOCATION AND REGION ................................................................. 115
3.5 CONCLUSIONS ............................................................................................................ 117

CHAPTER 4
THE EFFECT OF EDUCATION ON POVERTY IN KOSOVO AND ALBANIA
4.1 INTRODUCTION ......................................................................................................... 121
4.2 THE ESTIMATION FRAMEWORK ......................................................................... 122
4.3 DEPENDENT AND INDEPENDENT VARIABLES AND THEIR
MEASUREMENT ............................................................................................................... 125
4.3.1 DEPENDENT VARIABLES ............................................................................................................... 125
4.3.2 THE INDEPENDENT VARIABLES AND THEIR MEASUREMENT ................................................................. 127
4.4. DESCRIPTIVE STATISTICS ..................................................................................... 145
4.5 ESTIMATION RESULTS ............................................................................................ 152
4.5.1 PROBIT REGRESSION RESULTS ....................................................................................................... 154
4.5.2 OLS AND QUANTILE REGRESSION RESULTS ..................................................................................... 162
4.6 CONCLUSIONS ............................................................................................................ 177

CHAPTER 5
MODELLING SIMULTANEOUS DETERMINATION OF POVERTY,
REMITTANCES AND POVERTY
5.1 INTRODUCTION ......................................................................................................... 182
5.2 CAUSALITY BETWEEN POVERTY, FERTILITY AND REMITTANCES ........ 183
5.3 THE EMPIRICAL APPROACH ................................................................................. 190
5.4 DEPENDENT VARIABLES AND THEIR MEASUREMENT ................................ 192
5.4.1 POVERTY INDICATOR .................................................................................................................. 192
5.4.2 FERTILITY INDICATOR .................................................................................................................. 193
5.4.3 REMITTANCE RECEIPT INDICATOR .................................................................................................. 196
5.5 INDEPENDENT VARIABLES AND THEIR MEASUREMENT ........................... 199
5.5.1 DETERMINANTS OF POVERTY ........................................................................................................ 199
5.5.2 DETERMINANTS OF MIGRATION AND REMITTANCES ......................................................................... 202
5.5.3 DETERMINANTS OF FERTILITY ....................................................................................................... 212
5.6 CONCLUSIONS ............................................................................................................ 224
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CHAPTER 6
SIMULTANEOUS DETERMINATION OF POVERTY, MIGRATION AND
REMITTANCES AND POVERTY
6.1 INTRODUCTION ......................................................................................................... 227
6.2 DESCRIPTIVE STATISTICS AND ESTIMATION RESULTS .............................. 228
6.2.1 DESCRIPTIVE STATISTICS .............................................................................................................. 228
6.2.2 PRELIMINARY DIAGNOSTICS ......................................................................................................... 232
6.3 ESTIMATION RESULTS ............................................................................................ 237
6.4 CONCLUSIONS ............................................................................................................ 253

CHAPTER 7
CONCLUSIONS
7.1 INTRODUCTION ......................................................................................................... 259
7.2 MAIN FINDINGS AND CONTRIBUTION TO KNOWLEDGE ............................ 261
7.3 POLICY RECOMMENDATIONS .............................................................................. 271
7.4 LIMITATIONS AND FURTHER RESEARCH ........................................................ 274

REFERENCES……….……………………………………………………………………278

APPENDIX 4………..…………………………………………………………………...306

APPENDIX 5……….……….…………………………………………………………...368

APPENDIX 6……..……………………………………………………………………...369

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ABSTRACT

Despite the positive economic growth over the last decade, poverty in Kosovo and Albania remains
one of the highest in Europe. Both countries have experienced large migration flows which, together
with remittances, seem to have been an effective mechanism for mitigating poverty, which would
otherwise be even higher. This thesis investigates the determinants of poverty with a specific focus on
the effect of education on poverty in Kosovo and Albania using data from the Kosovar Household
Budget Survey 2011 and the Albanian Living Standard Measurement Survey 2012.

The review of studies suggests that there is no single unified theory of poverty. Moreover, there is no
underpinning study that would fully inform the modelling approaches in this thesis. The economic
theory of consumer behavior, duality theory as well as unitary approach provide the theoretical basis
for measurement of household welfare. On the other hand, several theories and studies have been
concerned with structural relations that affect poverty. According to human capital theory, education
leads to increased income and thus decreases the risk of poverty. Literature also highlights the
importance of migration, remittances and fertility in relation to poverty but also emphasizes the
importance of education with regards to remittances and fertility. A key contribution of this thesis is
that, it attempts to put all these theories and approaches together to inform the models to be estimated
in this thesis. Ordinary Least Squares and Probit estimation techniques are used to model
consumption and poverty while quantile regression is used to gain further insights into how the
determinants of household welfare change across the welfare distribution. Some of the factors which
influence household poverty are expected to be endogenously related to poverty. In this thesis, this
issue is addressed by controlling for the effect of the endogenous variables using pre-determined and
exogenous indicators. One of the most important factors affecting household welfare is education.
Indicators such as the highest level of education in the household, share of adult members with
respective education attainments, and mean years of education of adults are considered in the
estimation, in addition to education of the household head (a commonly used education indicator), as
they tend to better reflect the impact of education on household poverty.

Considering theoretical and empirical literature on migration, fertility and poverty, it seems
appropriate to expect that poverty, remittances and fertility are simultaneously determined; estimating
each of the relationships separately would therefore not be appropriate. Hence, another important
contribution of this thesis is that it models the three factors within a simultaneous equations system
and thus explores the impact of education on poverty via different channels at the same time. For this
purpose, Three-stage Least Squares (3SLS) estimation technique is utilized. An advantage of the
3SLS approach is that endogenous variables are allowed to appear on the right-hand side of the
equations.

Findings are largely in accordance with theoretical expectations; education is found to be related to
increased consumption and reduced poverty in both Kosovo and Albania, and the effect is higher for
higher levels of education attained. The Quantile regression results indicate that the positive effect of
increased levels of education on consumption is highest for the poorest households in Kosovo, while
the same applies to the richest households in Albania. The results also underline the importance of
migration and fertility in terms of household welfare in Kosovo and Albania. The 3SLS estimation
results confirm our expectations regarding the joint determination of poverty, fertility and remittances.
Due to some limitations of the Kosovar dataset however, this analysis is performed using the
Albanian dataset only.
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List of Tables

Table 3. 1. Poverty figures in Kosovo by urban and rural division, in percentages ______________________ 73
Table 3. 2. Absolute poverty by region in 2003, 2005 and 2009, in percentages ________________________ 74
Table 3. 3. Poverty figures in Albania according to urban/rural division, in percentages _________________ 76
Table 3. 4. Poverty figures in Albania according to region for 2002, 2005, 2008 and 2012, in percentages ___ 77
Table 3. 5. Enrolment rates in Kosovo in 2004/2005 and 2010, in percentages _________________________ 79
Table 3. 6. Education level of population aged 15 years and older in Kosovo spanning 2002-2009, in
percentages ______________________________________________________________________________ 80
Table 3. 7. Education attainment of population aged 20 and over in 2011 according to four main age cohorts in
Kosovo, in percentages _____________________________________________________________________ 81
Table 3. 8. Employment according to education level in Kosovo spanning 2002-2009, in percentages _______ 82
Table 3. 9. Distribution of employment in Kosovo according to education level spanning 2012-2014, in
percentages ______________________________________________________________________________ 83
Table 3. 10. Share of unemployed working age population in Kosovo according to education level during 2012-
2014 period, in percentages _________________________________________________________________ 83
Table 3. 11. Enrolment rates in Albania in 2001 and 2008-2014 period, in percentages __________________ 84
Table 3. 12. Education attainment of population aged 25 and over in 2011 in Albania, in percentages ______ 85
Table 3. 13. Employment according to education attainment according to gender in Albania, in percentages _ 86
Table 3. 14. Share of unemployed according to education attainment in Albania spanning 2011-2014, in
percentages ______________________________________________________________________________ 87
Table 3. 15. Labour market indicators in Kosovo, 2006-2014, in percentages __________________________ 88
Table 3. 16. Labour market indicators in Albania, 2006-2014, in percentages _________________________ 89
Table 3. 17. Population in Kosovo according to gender and age groups, in percentages _________________ 96
Table 3. 18. Infant mortality rate in Kosovo and Albania __________________________________________ 98
Table 3. 19. Population changes in Albania during 2005-2015 period ________________________________ 99
Table 3. 20. Population by age-group and gender in Albania, in percentages _________________________ 100
Table 3. 21. Share of poor households according to maximum level of education in the household in Kosovo and
Albania, in percentages ___________________________________________________________________ 104
Table 3. 22. Share of poor households according to mean years of education of adult members in Kosovo and
Albania, in percentages ___________________________________________________________________ 104
Table 3. 23. Share of poor households according to highest level of education attained by the head of the
household in Kosovo and Albania, in percentages _______________________________________________ 104
Table 3. 24. Maximum level of education in households with informally employed members in Kosovo and
Albania, in percentages ___________________________________________________________________ 106
Table 3. 25. Share of poor in remittance recipient households and with members abroad in Albania and Kosovo,
in percentages ___________________________________________________________________________ 107
Table 3. 26. Maximum level of education and mean years of education of adults in remittance recipient
households in Kosovo, in percentage _________________________________________________________ 107
Table 3. 27. Distribution of maximum level of education and mean years of education of adults in households
with and without migrants in Albania, in percentage ____________________________________________ 108
Table 3. 28. Distribution of maximum level of education and mean years of education of adults in households
with migrants in Albania, in percentages ______________________________________________________ 109
Table 3. 29. Number of children in the household according to highest level of education of the mother in
Kosovo, in percentages ____________________________________________________________________ 110
Table 3. 30. Highest level of education attained by mothers (18-45 years) in the household according to average
number of children to a family in Albania, in percentages ________________________________________ 111
Table 3. 31. Share of poor households according to highest level of education attained by mother of the
household in Kosovo and Albania, in percentages _______________________________________________ 111
Table 3. 32. Share of remittance recipients in female-headed households in Kosovo, in percentage ________ 112
Table 3. 33. Share of remittance recipients and households with migrants in male and female-headed
households in Albania, in percentages ________________________________________________________ 113
Table 3. 34. Poverty according to the presence of unemployed members in the household in Kosovo and
Albania, in percentages ___________________________________________________________________ 113
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Table 3. 35. Maximum level of education in the household according to number of unemployed adults in Kosovo
and Albania, in percentages ________________________________________________________________ 114
Table 3. 36. Distribution of remittance recipient households in Albania, in percentages _________________ 116
Table 3. 37. Distribution of remittances recipient households in Kosovo, in percentages ________________ 117
Table 4. 1. Independent variables to be included in the model _____________________________________ 129
Table 4. 2. Means of continuous variables for Kosovo ___________________________________________ 146
Table 4. 3. Means of continuous variables for Albania ___________________________________________ 146
Table 4. 4. Proportions of categorical variables for Kosovo _______________________________________ 149
Table 4. 5. Proportions of categorical variables for Albania ______________________________________ 150
Table 4. 6. Distribution of female-heads across age groups in Kosovo and Albania ____________________ 151
Table 4. 7. A summary of the sign and significance level of education variables across Probit models for Kosovo
and Albania _____________________________________________________________________________ 155
Table 4. 8. Marginal effects of Probit regression results for Kosovo ________________________________ 159
Table 4. 9. Marginal effects of Probit regression results for Albania ________________________________ 160
Table 4. 10. A summary of the sign and significance level of education variables in OLS and Quantile
regressions for Kosovo ____________________________________________________________________ 162
Table 4. 11. A summary of the sign and significance level of education variables in OLS and Quantile
regressions for Albania ____________________________________________________________________ 163
Table 4. 12. OLS regression results for Kosovo robust standard errors ______________________________ 166
Table 4. 13. OLS regression results for Albania ________________________________________________ 168
Table 5. 1. List of variables to be included in the system of equations and their expected sign ____________ 222
Table 6. 1. Descriptive statistics of continuous variables _________________________________________ 229
Table 6. 2. Proportion of categorical variables, in percentages ____________________________________ 230
Table 6. 3. Proportions of geographical indicators, in percentages _________________________________ 231
Table 6. 4. Distribution of the maximum level of education of mothers and fathers in the households and highest
level of education of the head, in percentages __________________________________________________ 231
Table 6. 5. F-test results for specific indicators _________________________________________________ 235
Table 6. 6. Test for endogeneity of consumption, fertility and remittance indicator _____________________ 237
Table 6. 7. 3SLS estimation results ___________________________________________________________ 240
Table 6. 8. Comparison of OLS, 2SLS and 3SLS results for consumption equation _____________________ 242
Table 6. 9. Comparison of OLS, 2SLS and 3SLS estimation results for remittances equation _____________ 248
Table 6. 10. Comparison of OLS, 2SLS and 3SLS estimation results for fertility equation ________________ 252

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List of Figures

Figure 2.3.1. Theories that help to explain welfare/poverty measurement and that related to structural relations
that affect poverty________________________________________________________ 46
Figure 3. 1. Population during 1948-2014 period ________________________________________________ 96
Figure 3. 2. Poverty rate in households with informally employed members in Kosovo and Albania, in
percentages _____________________________________________________________________________ 105
Figure 3. 3. Figure 3. 3. Poverty rate and distribution of the poor in female-headed households in Kosovo and
Albania, in percentages ___________________________________________________________________ 112
Figure 3. 4. Poverty rate by ethnicity of the head in Kosovo, in percentages __________________________ 114
Figure 3. 5. Poverty rate by ethnicity of the head in Albania, in percentages __________________________ 115
Figure 3. 6. Distribution of the poor by urban/rural location in Kosovo and Albania, percentages ________ 115
Figure 3. 7. Share of poor across seven regions of residence in Kosovo, in percentages ________________ 116
Figure 3. 8. Share of poor across four main regions of residence in Albania __________________________ 116
Figure 5. 1. Mechanisms via which education affects poverty ______________________________________ 183
Figure 5. 2. Average number of children born to a family in Albania ________________________________ 196

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