Pakistan: Migration, Remittances, and Development

The study investigates micro and macro effects of international migration and foreign remittances using (1) comparative static CGE model, (2) dynamic CGE model, (3) Econometric estimation. It uses data from two Social Accounting Matrices for the years 1990 and 2002 to operationalise CGE models and time series data for econometric estimation. The results of the study suggest that migration has upward pressure on wages. This leads to increase in consumption that have welfare improving and poverty reducing impact on both rural and urban households. However, it benefits more to urban households. Consequently, despite increase in standard of living, the gap between urban and rural households increases in both years –1990 and 2002. The remittances inflow in 2002 have strong positive effect than that in 1990 on macro aggregates. But poverty effects are higher in 1990. Analysis in dynamic CGE framework suggests that outflow of labour and inflow of remittances has not stimulated growth process. Econometric estimation reveals that the impact of remittances on poverty depends on the region from where remittances originates—Middle east or developed countries. Remittances from middle east have poverty reducing impact, but remittances from developed countries have no impact on poverty.