Labour Participation Decision and Preferences towards Different Employment Status in Response to Remittances: Evidence from the Provincial Capital of Punjab and Khyber Pakhtunkhawa (KPK), Pakistan

Abstract

This study has examined the effect of remittances on the labour force participation decisions and preferences of the individuals towards different employment status and work categories. The data from the rural and urban areas of the two provincial capitals of Pakistan has been collected to cover the main range of the topic. The study adds in existing literature the three major implications of labour market outcomes in response to remittances. First, the estimates of the Logit and Probit model suggest that remittances significantly increase the likelihood to not participate in the labour force. In addition, the differential effect of remittances depicts that as monthly remittances increase from 10,000 rupees to 500,000 rupees, the likelihood to participate in labour market decreases from 0.84 to 0.30 respectively. Second, estimates of the multinomial logit model reveal that among different employment categories, remittances increase the likelihood to participate in non-employment. While in case of participation in labour market, they are more likely to prefer full-time self-employment status. Third, estimates of the multinomial logit model depict that among different work professions, remittances increase the likelihood to participate in self-employment and employer profession. The results of the study suggest policy implication on the reallocation of labour from non-employment to self-employment or employer can generate productive outcomes. Furthermore, incentives in the adoption of self-employment and improvement in ease of doing business are essential to spill over the effect of remittances as job creators.