Labor Participation Decision and Preferences Towards Different Employment Status in Response to Remittances in Pakistan

This study has examined the effect of remittances on the labor force participation decisions and preferences of individuals towards different employment statuses 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 to existing literature the three major implications of labor market outcomes in response to remittances. First, the Logit and Probit model estimates suggest that remittances significantly increase the likelihood of not participating in the labor force. In addition, the differential effect of remittances depicts that as monthly remittances increase from 10,000 to 500,000PKR, the likelihood of participating in the labor 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 of participating in non-employment. While in the case of participation in the labor market, they are more likely to prefer full-time self-employment status. Third, estimates of the multinomial logit model depict that remittances increase the likelihood of participating in self-employment and employer profession among different work professions. The study’s results suggest that policy implications on reallocating labor 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.