Dr. Aziz Atamanov

Rural nonfarm employment and international migration as alternatives to agricultural employment: The case of Kyrgyzstan

Year: 2011

Adam Szirmai and Marrit van den Berg

Little is known about the rural nonfarm economy (RNFE) in post-soviet Central Asia, where agriculture can hardly sustain the pressure of abundant labour force on limited land resources. Moreover, there is scarce empirical evidence on the determinants of another alternative to agriculture - international migration - distinguishing between seasonal and permanent moves and exploring their interrelationships with local income generating activities. Finally, those few studies on the impact of migration and remittances on local income sources often ignore heterogeneity across rural households and the types of migration which can lead to misleading results and inhibit developing of more targeted policy measures. Based on several nationally representative household budget surveys, this dissertation addresses a number of issues related to the determinants and effects of local and international alternatives to agricultural employment in the rural areas of the Kyrgyz Republic. Empirical findings demonstrate that in recent years both local nonfarm activities and international migration have played an important role in the rural areas of the Kyrgyz Republic in the context of a stagnating small-scale agricultural sector constrained by numerous market imperfections. In line with the “push” factors, nonfarm income is found to play a more important role in the total income of poor rural individuals with lack of land confirming that barriers to access the RNFE are not substantial. Nevertheless, the lack of education, credit constraints and inadequate infrastructure limit the ability of the poor to move towards more remunerative nonfarm activities In contrast to local nonfarm activities, high transportation and settlement costs make international migration a not easily accessible option for rural households with small land holdings, excluding those in need for additional income to complement limited agricultural base. This implies that at the current stage local nonfarm activities and international migration do not overlap much with each other and provide income-generating opportunities to households with different levels of assets. However, other empirical findings make the interrelationships between two activities more complicated. In particular, we show that better education is the key determinant of both permanent migration and nonfarm wage employment, but that it does not play any role in the choice between participation in seasonal migration, local nonfarm self-employment and working at home in the agricultural sector. Therefore, the expected returns to education are higher for permanent migrants who undertake formal employment in comparison to short-term low-skilled jobs of seasonal migrants. Accordingly, the loss of better educated permanent migrants can potentially have a negative impact on formal employment in nonfarm activities, while the loss of seasonal migrants is not likely to generate a brain drain effect and may be less harmful for local development. In addition to being an important alternative to agriculture, international migration and associated remittances have a complex impact on agricultural productivity and crop income. In line with the New Economics of Labour Migration, remittances are found to stimulate agricultural productivity and as a result crop income, but the positive effect only holds for seasonal migration because this does not generate significant lost labour effects. At the same time, the positive impact of remittances on crop income is outweighed by significant negative lost labour effect for permanent migrants. This makes net effect from permanent migration on crop income negative. Importantly the positive impact of remittances on crop income is only found for small and middle size farms, which probably face stronger liquidity constraints and are more productive than large farms. Overall, one should not expect permanent migration to revive agricultural growth through higher productivity, but this potential may well exist for seasonal migration in the long run.

Selected publications by Aziz Atamanov