Simulation of a Voucher Policy for Improving the Social Condition of Individual Remittance Receivers in Macedonia

Abstract

Macedonia receives at least 4% of GDP as cash remittances per year while a third of the population faces poverty. The study has two objectives: first, to investigate if and to what extent remittances improve individual social indicators; and ii) to devise and ex-ante simulate the effects of Remittances’ Voucher policy for transforming their potentially sheltering role into a formal mechanism for social protection. To that end, we rely on the DotM 2008 Remittances’ Survey and a conditional mixed process estimator. We devise the Remittances’ Voucher providing each remittance receiver who obtains the money through financial institution the right to a health protection equal to the average health expenditure if he/she sets 6% of the remitted money on a pension account. We find that remittances have a significant effect onto consumption and, hence, contribute to reducing poverty. This finding lends support to the claim that remittances serve an informal social protection in the country. We also find that the Remittances’ Voucher policy may play a crucially positive impact on remittance receivers, as it improves poverty and the health condition, especially for females, rural dwellers and Macedonian recipients of remittances. The bold recommendation is for the government to introduce this policy into the array of social policies as means of framing remittances into more formal social protection.

Keywords: Remittances, Social protection, Remittances’ Voucher policy, Macedonia