Remittances and Labor Supply in the Northern Triangle

Abstract

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.

Impact of Remittances on Labour Supply and Occupational Choice in Rural India

“…A conflicting result was obtained by Posso (2012) wherein a study conducted across 66 developing nations indicated that external remittances resulted in an increase in aggregate labour supply in the remittance receiving region as migrant sending households stepped up labour supply to cover migration related expenses while demonstration effect caused non-migrant sending households to work more so as to facilitate migration by family members; besides remittances generated greater employment by overcoming credit constraints. Several other studies however find that remittances have a negative impact on labour supply by recipient households (Jadotte and Ramos 2015;Paul 2018;Sousa and Andres 2018). An interesting study by Rodriguez and Tiongson (2001) showed that in urban Philippines the labour supply reduction effects of remittances were more potent for males compared to females.…”

Island idleness: Investigating the impact of remittances on labour market participation in Comoros

“…He finds that remittances reduce child labour for girls and that this effect is only seen once an IV (2SLS) regression is ran. Sousa and Garcia-Suaza (2018) perform a propensity score matching to correct for the selection bias and find a small reduction in labour force participation among women. They also find that receiving remittances is associated with human capital development and leisure activities.…”

“…On the other side, remittances could increase investments in human capital or small businesses and self‐employment. Investments in human capital could result in higher skilled labour with higher wages that could overcome the increased reservation wage and especially in countries with imperfect credit market remittances can be used as alternative for credit and allow individuals to start self‐employed activities increasing labour supply (Sousa & Garcia‐Suaza, 2018).…”

“…In this study, we analyse the impact of receiving remittances on labour supply outcomes for women and men in the Comoros 4 . We follow Sousa and Garcia‐Suaza (2018) and apply propensity score matching to the 2014 and 2020 household surveys and compare individuals from remittances receiving households with matched individuals from non‐receiving households. The propensity score matching approach allows us to compare households which are similar along observable characteristics and only differ with respect to the treatment status (receiving or not receiving remittances).…”

“…For an in-depth discussion regarding the endogeneity issue and how propensity score matching reduces this bias seeSousa and Garcia-Suaza (2018).6 $1 = 449.05 KMF in July 20237 For example, the female participation rate of Mauritania stood at 41.1% in 2017, Morocco at 45.5% in 2017, Algeria at 36.9% in 2017, Tunisia at 47% in 2017, Libya at 48% in 2012 and Egypt at 42.2% in 2019.8 Working age includes individuals aged 15 to 65 years.9 We further provide a simple regression exercise to identify the determinants of labour supply apart of remittances in Appendix A.10 The corresponding values in 2014 were 100 000 KMF for the low tertial, 100 000 KMF to 650 000 KMF for the medium tertial and above 650 000 KMF for the high tertial.…”