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Remittances and informal work

Artjoms Ivlevs (University of the West of England, Bristol, UK)

International Journal of Manpower

ISSN: 0143-7720

Article publication date: 3 October 2016

649

Abstract

Purpose

The purpose of this paper is to explore the effect of remittances on informal employment in the migrants’ countries of origin, looking both at the remittance-receiving and non-migrant households.

Design/methodology/approach

Using data from a large survey conducted in six transition economies of Eastern Europe and Central Asia, the determinants of three labour market outcomes – not working, working formally and working informally – are estimated in a multinomial probit model. The endogeneity of remittances is dealt with instrumental variables following the two-stage residual inclusion technique. To assess possible impact of remittances on non-migrant households, conditional correlations between the labour market outcomes of non-migrant households and the region-level share of remittance receivers are obtained.

Findings

Both correlational and instrumental variable analyses suggest that that receiving remittances increases the likelihood of working informally. At the regional level, high prevalence of remittances is associated with a higher likelihood of informal work among the non-migrant households. Migration and remittances may thus be contributing to informal employment in migration-sending countries.

Research limitations/implications

The empirical analysis is based on cross-sectional data, which do not allow isolating the effects of unobserved respondent heterogeneity. To deal with this issue, future research could use panel data.

Originality/value

The study explicitly considers the effects of remittances on formal and informal employment of remittances receivers as well as people who do not receive remittances. It advances the understanding of what drives informality in developing and transition economies.

Keywords

Citation

Ivlevs, A. (2016), "Remittances and informal work", International Journal of Manpower, Vol. 37 No. 7, pp. 1172-1190. https://doi.org/10.1108/IJM-08-2015-0117

Publisher

:

Emerald Group Publishing Limited

Copyright © 2016, Emerald Group Publishing Limited

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