Labour supply in conditions of high unemployment: Evidence from a transition and post-conflict economy – The case of Kosovo

In this paper, we investigate the determinants of labour supply in Kosovo. Our approach takes into account demand-side restrictions of the labour market, which are typical in such a high unemployment economy, and pays particular attention to gender differences. We find that males’ labour supply is positively affected by their potential wages, especially in urban areas, while females’ labour supply is negatively affected by household labour income. We find significant regional differences in the labour supply of females, but not for males, suggesting that females are less mobile and unable to take advantage of more distant employment opportunities. In addition, we assess the appropriateness of the ILO guidelines in determining an individual’s labour force status in such environments and find that 18% of the inactive individuals are statistically a distinctive group (discouraged workers). We investigated the determinants engaging in job search and found that males and the more educated show a stronger attachment to the labour market. Our advice is for national statistics to report both narrow (ILO definition) and broad (that accounts for the discouraged workers) unemployment rates. This is the first systematic study of these issues in this post-socialist and post-conflict economy.