The effects of migration and remittances on inequality in rural Pakistan

Abstract

This paper presents a framework for analysing the impact of internal and international remittances on rural income distribution. This framework uses predicted income equations to predict (estimate) the incomes of households in two situations: excluding and including remittances. The results are then used to evaluate the changes in income distribution that occur when internal and international remittances are excluded, compared to when they are included. The study concentrates on the direct, first-order effects of remittances on income distribution. While the author is quite aware of the second- and third-round effects of remittances on income distribution through wage and employment linkages, these issues are largely ignored in this study. This study shows that both internal and international remittances have an essentially neutral impact on rural income distribution in Pakistan. In this study remittances have a neutral effect on income distribution because they are distributed fairly equally through the income order. Most quintile groups of households manage to produce their percentage share of both internal and international migrants. The latter result is particularly surprising, given the high entry costs to international migration in Pakistan. The results of this study suggest that international migrants from the lower income quintile groups actually were able to either find or borrow such large sums of money in order to migrate. -from Author