Migration, remittances, and male and female employment patterns

C Amuedo-Dorantes, S Pozo - American Economic Review, 2006 - pubs.aeaweb.org
American Economic Review, 2006pubs.aeaweb.org
Little is known about the labor market impacts of workers' remittances, despite their
magnitude in countries with considerable outmigration. Reports that families receiving
international remittances severely curtail their work efforts are fairly common in the popular
press (eg, Robert Frank, 2001). Yet, we lack rigorous analyses of how male and female
labor supplies respond to increases in remittance income to either support or refute these
anecdotal observations. According to the neoclassical model of labor-leisure choice (Mark …
Little is known about the labor market impacts of workers’ remittances, despite their magnitude in countries with considerable outmigration. Reports that families receiving international remittances severely curtail their work efforts are fairly common in the popular press (eg, Robert Frank, 2001). Yet, we lack rigorous analyses of how male and female labor supplies respond to increases in remittance income to either support or refute these anecdotal observations. According to the neoclassical model of labor-leisure choice (Mark R. Killingsworth, 1983), remittances—a source of nonlabor income—may lift budget constraints, raise reservation wages, and, through an income effect, reduce the employment likelihood and hours worked by remittance-receiving individuals. The receipt of remittances is usually preceded by the out-migration of working-aged household members, however, which may induce changes in the labor supply of nonmigrating household members in order to compensate for forgone income or to defray migration-related expenses. Distinguishing the disruptive effect from the income effect of remittance inflows is problematic, as most surveys do not contain detailed information on household outmigration and remittance receipt. To the extent that these two effects are expected to have opposite impacts on labor supply, however, we can assess which effect dominates. The impact of remittances on the decision to work has been previously examined by Edgard Rodriguez and Erwin R. Tiongson (2001) in Manila and by Edward Funkhouser (1992) in Managua. Without accounting for the endogeneity of remittances with respect to labor supply, they conclude that remittances reduce employment. Funkhouser also finds that remittances slightly increase self-employment. While informative, these studies focus on the decision to work and do not consider that, without altering employment rates, remittances may change the hours worked and/or the type of work performed in the receiving economy. Furthermore, the impact may be different on male and female labor supplies and responsiveness to remittance income may vary from rural to urban areas. Using data from Mexico—a country with a large and growing remittance inflow1—we address the following questions: How does the employment status and hours worked by men and women vary owing to international remittances? Do male and female labor supplies differ across various types of employment in rural versus urban areas due to higher remittance inflows?
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