Micro Responses during the Transition in Kazakhstan, Central Asia, and Armenia Charles Becker Department of Economics, Duke University Workshop on Macro Risks and Micro Responses Friday, February 15, 2008, H Europe and Central Asia Region Of the World Bank

Acknowledgements: Material is drawn from work with co-authors Irina Merkuryeva, Erbolat Musabek, Ai-Gul Seitenova, and Dina Urzhumova; valuable research assistance (and information from their own research) has been provided by Aleksandr Andreev, Nunik Nahapetyan, and Nurgul Ukueva.

Overview Stylized facts Mortality: declining life expectancy at birth Mortality: rising accidental death and cardiovascular mortality Marriage Fertility Disability Migration Remittances Earnings, wage gaps, and consumption

Stylized Facts Economic deterioration starting (depending on the country) gradually between 1989 and 1991, accelerating in 1992; with near collapse occurring Stabilization in in terms of GDP, but continued formal sector employment decline Renewed crisis loosely associated with Russian debt default Low-grade wars in Armenia (1992) and Tajikistan (1995) aggravate problems Oil and mining-led economic recovery in Kazakhstan (1999 – present) and Russia (c – present) result in recovery to Soviet peak per capita incomes in Kazakhstan (2004) and Russia (2006?)

Stylized Facts (cont.) Extremely limited economic recovery in Kyrgyzstan, Tajikistan, and Uzbekistan; recovery in Armenia driven largely by remittances Initial emigration from Kazakhstan and Central Asia is largely European (Russian, other Slavic ethnicities, German) Economic migration of titular nationalities follows with Russias and Kazakhstans recovery (KZ becomes a destination) – shorter term, and linked to remittances

I. Declining life expectancy at birth Huge declines registered in Kazakhstan; large declines elsewhere Link to economic collapse is obvious Declines understated because of rise in underreporting of infant mortality Decreased accuracy of vital statistics causes downplay of decline in poorer countries

II. Growth in mortality is not evenly distributed Cardiovascular system and external cause mortality increases are most important Rise is most severe among working-age males European male population has the largest increases

III. Declining marriage – with recovery Huge declines registered in Kazakhstan, Kyrgyzstan, and elsewhere Recovery follows, especially in Kazakhstan, but only with a considerable lag after economic recovery is assured Part of the decline translates into delayed marriage, as seen in rising age of first marriage However, marriage is very age-concentrated, especially for women, and remarriage is rare a large share of the cohort born between 1973 and 1985 will never marry

IV. Declining birth rates Birth rate declines follow declining marriage rates with a lag. Fertility recovery is underway (again, lagging marriages, which in turn lag economic recovery) in Kazakhstan Age-specific birth rate declines are largest for women under age 25. Births have recovered somewhat for women aged 20+; secular teen birth rate decline has continued.

V. Seeking public assistance: early retirements & disability pensions As employment becomes uncertain, early retirements are encouraged throughout the region. Many also seek disability determination, which is granted fairly liberally in the early transition years. Governments then crack down as costs spiral upward. No link in rise in disability to actual health conditions. Rather, with deteriorating health services, child disability has shown a secular increase. Rates of reported disease among adult population have been steady. Rehabilitations surge with economic recovery.

VI. Migration Russia is main destination Urban, Russified, skilled labor outflows are greatest Departure of European population encouraged by public policies Middle-aged population even more responsive to differential conditions than younger workers

Migration (cont.) Lags are not terribly long, but are especially short for widely-available news (exchange rate fluctuations, Russian debt default) Migration from Kyrgyzstan, Tajikistan, Uzbekistan, Armenia should be much less sensitive to relative economic conditions vis-à-vis Russia, since gaps are so vast. Even in these countries, however, the vast emigration of the early and mid-1990s has slowed.

Net Emigration Rates per 1,000 Inhabitants ( )

VII. Remittances Tajikistan, Kyrgyzstan, and Armenia are now among the countries with the highest share of remittances/GDP, in the neighborhood of 10% to 15%. Linked to real estate booms in capital cities (Neinke Oomes, IMF-Armenia) May also have exchange rate and hence Dutch-disease consequences. But, remittances are overwhelmingly used for consumption, and add to local demand

YearRemittances, mln USD Remittances/Exports % Remittances/GDP, % Remittance income in the Krygyz Republic Source: S. Aitymbetov Emigrant Remittances: Impact on Economic Development of Kyrgyzstan ICEG working paper (data obtained from National Statistical Committee, National Bank and authors calculations)

Freq. Percent To start a new job/business635.8 To look for a better paid job Study201.9 Health60.6 To join family90.8 Marriage20.2 Other191.8 Total Reason for migration, Tajikistan (LSMS)

Freq. Percent Russia Kazakhstan71.61 Kyrgyzstan30.69 Uzbekistan71.61 Europe51.15 Other40.92 Total Remittances by the sending country, Tajikistan (LSMS)

The purpose of transfer Freq. Percent purchases of foods and basic necessities investment in construction51.03 investment in HH enterprise00 purchase of durable goods20.41 educational expenses00 Medical expenses30.62 wedding/funeral10.21 child support10.21 Charity Other00 Total Remittances by the purpose of the transfer, Tajikistan (LSMS)

VIII. Economic colonization Investments begin to flow in to Kyrgyzstan from Kazakhstan Trade with China soars Invasion of tourists Torpedo factory re-opens

Когда казахи купят Киргизию? "Караул! На страну покушается Казахстан, мы можем потерять независимость!" - вопиют нынче иные киргизские "патриоты". - "Да было б чего терять: наша госневинность давно уж порушена", - парируют оппоненты-скептики. Итак, главный вопрос: чего стоит или точнее - во что обходится стране "политическая девственность"?

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