Nexus between workers’ remittances, unemployment, labor migration and economic growth in Pakistan

Abstract

This study examines the relationship between workers' remittances and economic growth along with labor migration in Pakistan. The study also investigates the relationship between workers' remittances and unemployment and captures the interaction between unemployment and economic growth. Annual time series data from 1975 to 2010 is used for analysis. Following this, Johansen and Juselius' (1990) co-integration technique and recursive simultaneous equations model have been applied for analysis. Multivariate and Bivariate Co-integration approach shows that there exists long-term relationship between workers' remittances and economic growth in Pakistan. Bivariate co-integration presents that economic growth has long-run relationship with labor migration and unemployment. There is long-run relationship between workers' remittances and unemployment and human capital has long run association with workers' remittances. Granger Causality test shows that there exist unidirectional causality between workers' remittances and economic growth. Unidirectional causality runs from labor migration and unemployment to economic growth. Similarly, unidirectional causality runs from workers' remittances to unemployment level in country. The recursive OLS results manifested that workers' remittances have significant positive impact on consumption and consumption in turn has significant positive effect on economic growth.

Human capital flight and output growth nexus: evidence from Nigeria

“…This can be as a result of remittances spent on consumption purposes and not revenue-yielding investments. This has been corroborated in the literature (Adeagbo and Ayandibu, 2014; Asad et al , 2016; Lim and Simmons, 2015). Our findings do not, therefore, conform to the proposition of Cohen (2005).…”

“…Contrarily, Meyer and Shera (2017) found a positive impact of remittances on economic growth with the impact increasing at higher levels of remittance compared to the Gross Domestic Product in a panel study conducted in six developing countries. Similar to findings by Tabassum et al (2017) and Mago (2018), Asad et al (2016) confirmed a long-run relationship between workers’ remittances and economic growth and a uni-directional causality from workers’ remittances to economic growth. Furthermore, the study found a uni-directional causality from unemployment to labor migration.…”

“…More practically, Meyer and Shera (2017) revealed that in recent times, about 27% of developing nations’ GDP is accounted as remittances. Sadly, remittance inflows have been seen as being used for consumption purposes rather than productivity spending (Asad et al , 2016; Lim and Simmons, 2015).…”

Economic and Tourism Factors Affecting the Real Gross Regional Domestic Product: A Case Study

“…The results of a dynamic generalized method of moments (GMM) model found that there is a positive relationship between foreign direct investment (FDI) and real GDP growth, but only for low-income African countries, not the middle-income countries. Meanwhile, Asad et al (2016) also examine a study about workers' remittances and economic growth along with labor migration in Pakistan. Using multivariate and bivariate co-integration approach, the results show that there is long-run relationship between workers' remittances and economic growth in Pakistan.…”

“…These studies investigate the relationship of FDI, DI and employment to real GDP. Based on these studies, the present study will add a different variable, namely tourist, as it is not used in previous studies by Alemu and Lee (2015), Asad et al (2016) and the others. The reason for using the tourist as a variable is because the Special Region of Yogyakata (DIY) is the second main destination for tourists, both domestic and foreign-tourists, after Bali island.…”