Labor Supply, School Attendance, And Remittances From International Migration : The Case Of El Salvador

Abstract

The objective of this paper is to present microeconomic evidence on the economic effects of international remittances on households' spending decisions. Remittances can increase the household budget and reduce liquidity constraint problems, allowing more consumption and investment. In particular, remittances can enable investing in the human capital of children, a key outcome from the perspective of growth in a developing country. Robust estimates that take into account both selection and endogeneity problems in estimating an average impact of remittances are substantially different from least squares (OLS) estimates presented in previous studies. After controlling for household wealth and using selection correction techniques, such as propensity score matching as well as village and household networks as instruments for remittance receipts, average estimates suggest that girls and young boys (under 15 years old) from recipient households are more likely to be enrolled in school than those from non-recipient households. Remittances are also negatively related to child labor and adult female labor supply, while on average adult male labor force participation remains unaffected. That additional income derived from migration increases girls' education and reduces women's labor supply, with no major impact on activity choice for males 15 years or older, suggests the presence of gender differences in the use of remittances across (and possibly within) households.

Remittances and the Dutch Disease

“…1 Within this framework, the higher disposable income triggers an expansion in aggregate demand, which for exogenously given prices of tradable goods, culminates in higher relative prices of nontradable goods (spending effect) that corresponds to a real exchange rate appreciation. The higher nontradable price leads to an expansion of the nontradable sector causing a further reallocation of resources toward the nontradables (resource movement effect).…”

“…Self-interested will thus tend to be procyclical (Giuliano and Ruiz-Arranz, 2006). From a macroeconomic perspective, Chami et al (2006) use 1 See Corden and Neary (1982) for details. Lartey (2008) models 'Dutch Disease' effects in a real business cycle framework.…”

“…Lartey et al (2008) also show that these flows lead to a resource reallocation towards nontradables. Finally, Acosta (2006), Fajnzylber and López (2008), Funkhouser (1992), and Hanson (2007) in Mexico report that remittances reduce households' labor supply. 4 3 The Model…”

Remittances, schooling, and child labor in Mexico

“…There is evidence from Pakistan, El Salvador, and other Latin American economies that suggests that migration tends to reduce the incidence of child labor and to promote school retention (e.g. Cox Edwards and Ureta, 2003;Acosta, 2006;Mansuri, 2006;Acosta, Fajnzylber and López, 2007). Most of these studies use…”

Household survey data for research on well-being and behavior in Central Asia

“…The preponderance of evidence from migrant sending countries seems to point to a decline in labor force participation for women as a consequence of migration of other household members (Acosta, 2006, Amuedo-Dorantes and Pozo, 2006, Lokshin and Glinskaya, 2009, Mendola and Carletto, forthcoming, Rodriguez and Tiongson, 2001). The common explanation is that migration brings remittance income, which increases the reservation wage of those left behind, thus leading to a decline in labor supply.…”