Remittances and Household Welfare: A Case Study of Pakistan

50 Pages Posted: 30 Jun 2010

See all articles by Vaqar Ahmed

Vaqar Ahmed

Sustainable Development Policy Institute (SDPI)

Guntur Sugiyarto

Asian Development Bank

Shikha Jha

Asian Development Bank

Date Written: February 2010

Abstract

This paper examines the impact of remittances on economy and household welfare in Pakistan by using a general equilibrium framework and microeconometric analysis. The first approach is to highlight the macroeconomic and sectoral effects of a reduction in remittances, while the second is to show how remittances decrease the probability of being poor and affect the household consumption expenditure and hence poverty. The findings suggest that reduction in remittances will reduce gross domestic product, investment, and household consumption, which in turn will increase poverty. On the other hand, the probability of households becoming poor decreases by 12.7% if they receive remittances. The poverty headcount ratio and Gini coefficient decline by 7.8% and 4.8%, respectively, for household-receiving remittances. Given the important role of remittance, the key challenge for the government is to provide incentives to attract more remittances sent through formal channels and ensure their productive use.

Keywords: International Migration and Remittances, Household Welfare, Poverty, Inequality, CGE Model, Microeconometrics, Pakistan

Suggested Citation

Ahmed, Vaqar and Sugiyarto, Guntur and Jha, Shikha, Remittances and Household Welfare: A Case Study of Pakistan (February 2010). Asian Development Bank Economics Working Paper Series No. 194. Available at SSRN: https://ssrn.com/abstract=1632200 or http://dx.doi.org/10.2139/ssrn.1632200

Vaqar Ahmed (Contact Author)

Sustainable Development Policy Institute (SDPI) ( email )

38, Old Embassy Road (AttaTurk Avenue)
G-6/3
Islamabad, 44000
Pakistan

Guntur Sugiyarto

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

Shikha Jha

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines

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