STOCKHOLM SCHOOL OF ECONOMICS Department of Economics 659 Degree project in economics Spring 2014 Brain Drain – A Future Threat in Kosovo? A Minor Field Study in Prishtina Aleksandra Dennier * Sara Harmenberg ** ABSTRACT: This thesis primarily examines the risk for brain drain in the future in Kosovo through survey data collected during March-April 2014 at the Public University of Prishtina. Differences in current emigration intentions between university students and a control group from a practical school are investigated. Also differences between fields of study are assessed in order to determine whether Kosovo risks future labor shortages in any specific sector. Further, the emigrations intentions under the hypothetical but plausible future scenario of European Union entrance is introduced and examined. Lastly, it is assessed whether Kosovo might benefit from future emigration through potential brain gain effects. No indications of potential brain have been found, but the generally high level of emigration intentions across all investigated groups is notable. The most important push factor for emigration from Kosovo today is unemployment, why development of functioning labor markets is of most importance for creating a sustainable society in the future. However, the results from investigating potential brain gain support that future emigration might not be solely harmful, but also benefit Kosovo in the future. Keywords: international migration, human capital, demographic trends JEL Classification: F22, J11, J24, O15 Student id. no: 22214* 22292** Supervisor: Anders Olofsgård Date submitted: May 14th, 2014 Date examined: June 11th, 2014 Discussant: Melinda Nordvall and Adrian Rydén Examiner: Örjan Sjöberg ACKNOWLEDGEMENTS During the course of this field study, we have had the pleasure to meet many inspiring people and received help to extents for which we cannot express enough gratitude. First of all, we are most thankful to Swedish International Development Cooperation Agency (SIDA) for the scholarship that allowed us to conduct the field study in Kosovo and a special gratitude is owed to Blekinge Institute of Technology (BTH) and Piotr Urbanski who distributed the scholarship. We are also thankful for the help of Maria Melbing, Head of Development Cooperation for SIDA in Kosovo, who took the time to be our supervisor in field and helped us immensely in our orientation in Prishtina. Further, this study and thesis would not have been achieved without the expertize and patience of our supervisor in Stockholm, Anders Olofsgård. In field, we received overwhelming hospitality and helpfulness by the many Faculties of the Public University of Prishtina and we would hereby like to show our gratitude to Prof. Dr. Remzije Istrefi and Prof. Dr. Qerim Qerimi from the Faculty of Law, Prof. Ass. Dr. Mimoza Ibrani and Ph.D. Hana Maloku from the Faculty of Engineering, Prof. Ass. Dr. Agim Begzati from the Faculty of Medicine, Lecturer Fatlume Berisha and Prof. Ass. Zeqir Veselah from the Faculty of Education. We are however most thankful to Prof. Asoc. Dr. Florentina Xhelili-Krasniqi and Ass. Prof. Gentrit Berisha from the Faculty of Economics for their efforts to arrange our entire process, providing us with help from their best students, with working space and other requisites which largely facilitated our study. We also praise and are thankful to all the professors who took time from their lectures to let us distribute our surveys to the attending students. Also, many thanks to school director Faik Salihu and his staff who kindly helped us collect data from their school “Shtjefën Gjeçovi,” but also to Mr. Christoph Heil and Ms. Jehona Serhati from the GIZ that provided the contact with the school. For guidance and inspiration along the way, we are thankful to Ph.D. Roswitha King and Dr. Artjoms Ivlevs who provided their survey instrument upon request. Great gratitude is also owed to all the students who patiently answered the survey—we would not have a study without them. Last but not least, special thanks to us dear Erina, Liridon, Elizabeta, Terese and Valdet. TABLE OF CONTENTS 1. INTRODUCTION .................................................................................................................................................. 1 1.1 Objectives .................................................................................................................................. 1 2. BACKGROUND ..................................................................................................................................................... 2 2.1 International Overview ............................................................................................................. 2 2.2 Kosovo ...................................................................................................................................... 3 2.2.1 Current Situation ............................................................................................................................................ 3 2.2.2 Historic Migrations ......................................................................................................................................... 4 2.2.3 Current Diaspora, Governmental policy and Migration Trends ........................................................................ 4 3. PREVIOUS RESEARCH ....................................................................................................................................... 5 3.1 Neoclassical Economic Theory ............................................................................................... 5 3.1.1 Macro Perspective ............................................................................................................................................ 5 3.1.2 Micro Perspective ............................................................................................................................................. 6 3.2 Brain Drain and Brain Gain ..................................................................................................... 7 4. MAIN QUESTION AND HYPOTHESIS ........................................................................................................ 7 5. METHOD ............................................................................................................................................................... 10 5.1 Survey and data collection process ......................................................................................... 10 5.2 Model specifications ............................................................................................................... 11 5.3 Assessing Brain Drain ............................................................................................................ 12 5.3.1 Dependent Variables .................................................................................................................................... 12 5.3.2 Control Variables ......................................................................................................................................... 12 5.3.3 Regressions .................................................................................................................................................... 16 5.4 Assessing Differences in Emigration Intentions ................................................................... 16 5.5 Assessing Brain Gain .............................................................................................................. 17 5.6 Robustness .............................................................................................................................. 18 6. RESULTS ................................................................................................................................................................ 19 6.1 Econometric results ................................................................................................................ 20 6.2 Summery statistics .................................................................................................................. 21 6.2.1 Converging Emigration Intentions ................................................................................................................. 21 6.2.2 Suggestive Evidence for Brain Gain ............................................................................................................... 22 6.3 Other Descriptive Statistics .................................................................................................... 22 6.4 Summery of results ................................................................................................................. 23 7. DISCUSSION ......................................................................................................................................................... 24 8. LIMITATIONS ...................................................................................................................................................... 26 9. CONCLUSIONS ................................................................................................................................................... 28 10. REFERENCES .................................................................................................................................................... 29 11. APPENDIX .........................................................................................................................................................