THE EFFECT OF EDUCATION ON POVERTY IN KOSOVO AND ALBANIA

This work investigates the determinants of poverty with a specific focus on the effect of education on poverty in Kosovo and Albania using survey data. Considering theoretical and empirical literature on migration, fertility and poverty, it seems appropriate to expect that poverty, remittances and fertility are simultaneously determined; thus estimating each of the relationships separately would not be appropriate. An important contribution of this work 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, the Three Stage Least Squares (3SLS) estimation technique is utilised. An advantage of the 3SLS approach is that endogenous variables are allowed to appear on the right hand side of equations.Findings are largely in accordance with theoretical expectations; education is found to be related to increased consumption and reduced poverty risk in both countries, and the effect is higher for higher levels of education attained. The 3SLS estimation results confirm expectations regarding joint determination of poverty, fertility and remittances.