The Impact of Migration and Remittances on Labor Supply in Tajikistan

Remittances from labor migrants have become the largest source of foreign exchange earnings for developing countries. Although such remittances exert positive effects on migrant-sending countries, such as reduced unemployment, studies that investigate their negative effects remain scarce.

To bridge the research gap, the study examines the effects of migration and remittance on the domestic labor market of Tajikistan—a labor migrant contributor and remittance-dependent country, whose labor migrants are largely employed in Russia. Specifically, the study estimates the impact of international migration and receipt of remittances on labor supply decisions and employment of family members left behind. The authors employed the control function approach using unique high-frequency household panel data from the World Bank’s Listening to Tajikistan survey for an accurate examination of the simultaneity of migration/remittance and labor supply decisions of left-behind members.

The results demonstrate that sending a household member as a labor migrant reduces the employment rate of non-migrant household members in Tajikistan by 5.4 percentage points. Moreover, receiving remittances reduces the employment rate of non-migrant household members by 10.2 percentage points. The findings suggest that the discouraging effect or reservation wage effect of having a migrant member and receiving remittances is significant and exceeds other potential positive effects on Tajikistan.

The paper was prepared as a part of a project entitled “Study on Remittances and Household Finances in the Philippines and Tajikistan” by the JICA Ogata Sadako Research Institute for Peace and Development.

This paper was published in the Journal of Asian Economics and can be read from the link below.