Labour Participation Decision and Preferences towards Different Employment Status in Response to Remittances: Evidence from the Provincial Capital of Punjab and Khyber Pakhtunkhawa (KPK), Pakistan

Shair, Waqas and Tariq Majeed, Muhammad and Ali, Amjad (2021): Labour Participation Decision and Preferences towards Different Employment Status in Response to Remittances: Evidence from the Provincial Capital of Punjab and Khyber Pakhtunkhawa (KPK), Pakistan.

Abstract

This study has examined the effect of remittances on the labour force participation decisions and preferences of the individuals towards different employment status and work categories. The data from the rural and urban areas of the two provincial capitals of Pakistan has been collected to cover the main range of the topic. The study adds in existing literature the three major implications of labour market outcomes in response to remittances. First, the estimates of the Logit and Probit model suggest that remittances significantly increase the likelihood to not participate in the labour force. In addition, the differential effect of remittances depicts that as monthly remittances increase from 10,000 rupees to 500,000 rupees, the likelihood to participate in labour market decreases from 0.84 to 0.30 respectively. Second, estimates of the multinomial logit model reveal that among different employment categories, remittances increase the likelihood to participate in non-employment. While in case of participation in labour market, they are more likely to prefer full-time self-employment status. Third, estimates of the multinomial logit model depict that among different work professions, remittances increase the likelihood to participate in self-employment and employer profession. The results of the study suggest policy implication on the reallocation of labour from non-employment to self-employment or employer can generate productive outcomes. Furthermore, incentives in the adoption of self-employment and improvement in ease of doing business are essential to spill over the effect of remittances as job creators.

• Item Type: MPRA Paper
• Language: English
• Keywords: Remittances, Labour Participation, Self-Employment, Wage-Employment
• Subjects: C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C24 - Truncated and Censored Models ; Switching Regression Models ; Threshold Regression Models; F - International Economics > F2 - International Factor Movements and International Business > F24 - Remittances; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J22 - Time Allocation and Labor Supply

References

Acosta, P. (2011). School Attendance, Child Labour, and Remittances from International Migration in El Salvador. Journal of Development Studies, 47(6), 913-936.

Acosta, P. (2020). Intra-Household Labour Allocation, Migration, and Remittances in Rural El Salvador. The Journal of Development Studies, 56(5), 1030-1047.

Airola, J. (2008). Labor Supply in Response to Remittance Income: The Case of Mexico. The Journal of Developing Areas, 41(2), 69-78.

Alcaraz, C., Chiquiar, D., & Salcedo, A. (2012). Remittances, schooling, and child labor in Mexico. Journal of Development Economics, 97(1), 156-165.

Binzel, C., & Assaad, R. (2011). Egyptian Men Working Abroad: Labour Supply Responses by the Women Left Behind. Labour Economics, 18, S98-S114.

Bussolo, M., & Medvedev, D. (2008). Do Remittances Have a Flip Side? A General Equilibrium Analysis of Remittances, Labor Supply Responses and Policy Options for Jamaica. Journal of Economic Integration, 23(3), 734-764.

Cabegin, E. C. A. (2006). The effect of Filipino overseas migration on the non-migrant spouse's market participation and labor supply behavior (No. 2240). IZA Discussion Papers.

Cameron, A., & Trivedi, P. (2005). Microeconometrics. Cambridge: Cambridge University Press.

Cox-Edwards, A., & Rodríguez-Oreggia, E. (2009). Remittances and Labor Force Participation in Mexico: An Analysis Using Propensity Score Matching. World Development, 37(5), 1004-1014.

Dávalos, J., Karymshakov, K., Sulaimanova, B., & Abdieva, R. (2017). Remittances and labor supply of the left-behind youth: Evidence from Kyrgyzstan. Asian and Pacific Migration Journal, 26(3), 352-380.

Dary, S.K. and Ustarz, Y. (2020). Internal remittances and employment choices in rural Ghana. African Journal of Economic and Management Studies, 11(2).

Dermendzhieva, Z. (2010). Migration, Remittances, and Labour Supply in Albania. CERGE-EI Working Paper.

Emilsson, A. (2011). The impact of remittances on labor supply: the case of Jordon. Master Thesis, NEKMOI, Lund University, 39. https://lup.lub.lu.se/student-papers/search/publication/2169708

Funkhouser, E. (2006). The effect of emigration on the labor market outcomes of the sender household: a longitudinal approach using data from Nicaragua. Well-Being and Social Policy, 2(2), 5-25.

Görlich, D., Omar Mahmoud, T., & Trebesch, C. (2007). Explaining labour market inactivity in migrant-sending families: Housework, hammock, or higher education? Kiel working paper No. 1391. https://www.econstor.eu/bitstream/10419/4121/1/kap1391.pdf

Grigorian, D., & Melkonyan, T. (2011). Destined to Receive: The Impact of Remittances on Household Decisions in Armenia. Review of Development Economics, 15(1), 139-153.

Government of Pakistan. 2019. Bureau of Emigration & Overseas Employment. https://beoe.gov.pk

Hanson, G., 2007. Emigration, remittances, and labor force participation in Mexico. Integration and Trade Journal, 27, 73–103.

Hausman, J. A. (1978). Specification tests in econometrics. Econometrica: Journal of the econometric society, 1251-1271.

Itzigsohn, J. (1995). Migrant remittances, labor markets, and household strategies: A comparative analysis of low-income household strategies in the Caribbean Basin. Social Forces, 74(2), 633-655.

Jackman, M. (2014). A Note on the Labor Market Effects of Remittances in Latin American and Caribbean Countries: Do Thresholds Exist? The Developing Economies, 52(1), 52-67.

Jadotte, E., International Migration, Remittances and Labour Supply: The Case of the Republic of Haiti, Working Paper 2009/28, World Institute for Development Economic Research 2009.

Justino, P., & Shemyakina, O. (2012). Remittances and Labour Supply in Post-Conflict Tajikistan. IDS Working Papers, 2012(388), 1-37.

Khan, M. I., & Valatheeswaran, C. (2016). International migration, remittances and labour force participation of left-behind family members: A study of Kerala. Margin: The Journal of Applied Economic Research, 10(1), 86-118.

Kim, N. (2007). The Impact of Remittances on Labor Supply: The Case of Jamaica. World Bank Policy Research Working Paper No. 4120. https://doi.org/10.1596/1813-9450-4120

Kozel, V., & Alderman, H. (1990). Factors determining work participation and labour supply decisions in Pakistan's urban areas. The Pakistan Development Review, 29(1), 1-17.

Lokshin, M., & Glinskaya, E. (2009). The effect of male migration on employment patterns of women in Nepal. The World Bank Economic Review, 23(3), 481-507.

Lucas, R. (1987). Emigration to South Africa’s mines. American Economic Review, 77, 313–330.

Mendola, M., & Carletto, C. (2012). Migration and Gender Differences in the Home Labour Market: Evidence from Albania. Labour Economics, 19(6), 870-880.

Migration and remittances factbook 2019, The World Bank, Washington DC. http://www.worldbank.org/en/topic/migrationremittancesdiasporaissues/brief/migration-remittances-data

Mughal, M., & Makhlouf, F. (2013). Labour Effects of Foreign and Domestic Remittances-Evidence from Pakistan. International Review of Applied Economics, 27(6), 798-821.

Piracha, M., Randazzo, T., Vadean, F. (2013) Remittances and Occupational Outcomes of the Household Members Left-Behind. IZA Discussion Paper No.7582.

Posso, A. (2012). Remittances and Aggregate Labour Supply: Evidence from Sixty Six Developing Nations. The Developing Economies, 50(1), 25-39.

Raihan, S., Rahman, M. M., Afroze, A., & Uddin, M. (2018). How Does Remittance Affect Labor Force Participation Behavior and Employment Choice in Bangladesh?. In Structural Change and Dynamics of Labor Markets in Bangladesh (pp. 155-170). Springer, Singapore.

Rodriguez, E. R., & Tiongson, E. R. (2001). Temporary migration overseas and household labor supply: evidence from urban Philippines. International Migration Review, 35(3), 709-725.

Shair, W., & Majeed, M. T. Labor Market Outcomes of Non-migrant Members in Response to Remittances: Evidence from Provincial capital of Punjab and Khyber Pakhtunkhawa (KPK). Review of Socio-Economic Perspectives, 5(1), 1-22.

Stanley, D. (2014). Can International Transfers be Problematic? Honduran Remittances and Labour Supply Decisions. Contemporary Economic Policy, 33(3), 550-570.

Tagoe, N., Nyarko, E., & Anuwa‐Amarh, E. (2005). Financial challenges facing urban SMEs under financial sector liberalization in Ghana. Journal of small business Management, 43(3), 331-343.