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Remittances and labour force heterogeneity: can the disincentive effect vary?

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  • Pandikasala Jijin

Abstract

Recent empirical research on remittances suggests that they reduce work effort in the receiving households, resulting in low labour participation in developing economies. However, most studies inadvertently avoid heterogeneity of the labour force, thus overestimating the disincentive effect. The present study re-examines the relationship by dissecting the labour force into four distinct segments: young, prime, near-elderly, and elderly, while also considering gender differences. Among these, the prime labour force is the focal point to check the real disincentive effect of remittances. The paper empirically tests the effect of remittances on labour force participation utilising a panel of 50 lower-middle-income countries over the period 1990–2020. It concludes that remittances strongly reduce labour force participation among young and elderly, leaving the prime labour force untouched. The differential impacts negate the existing notion of a disincentive effect. In contrast with the current view, the study also proves that remittances do not discourage female work participation; instead, several non-economic factors are at play.

Suggested Citation

  • Pandikasala Jijin, 2026. "Remittances and labour force heterogeneity: can the disincentive effect vary?," International Review of Applied Economics, Taylor & Francis Journals, vol. 40(1), pages 40-62, January.
    • Handle: RePEc:taf:irapec:v:40:y:2026:i:1:p:40-62
    DOI: 10.1080/02692171.2024.2404947
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