Arnoldshain Seminar XI “Migration, Development, & Demographic Change –

1

Migration and Remittances in Emerging Market Economies of

Southeast Asia: Do they Offer Paths for Structural Poverty

Transitions?

Arnoldshain Seminar XI“Migration, Development, & Demographic Change –

Problems, Consequences, Solutions”

Mulubrhan Amare

(with Herman Waibel & Lena Hohfeld )

Institute of Development and Agricultural Economics, School of Economics &

Management, Leibniz Universität Hannover, Germany

Outline

Background Objectives Conceptual framework Data description Econometric approach Results Summary & conclusions

2

Motivation (I)

The share of remittances to total income growing in many developing

countries.

More than 30-40% rural income from remittances (Nguyen et al., 2007)

Evidences on poverty reduction and inequality impact is mixed

Migrant in low quality employment

Remittances may spend for consumption

Increase inequality in the community of origin

Background

3Background Objectives Conceptual framework Data Econometric approach Results Conclusions

Motivation (II) Limitations on the impact of migration and remittances

1. Do not distinguish whether remittances lead to structural transition due

to asset growth or

2. Stochastic transition due to apparent higher income

3. Overestimation of poverty transition impact of migration & remittances

To learn the impact of migration on structural transitions, asset based

approach is used

Suitable for identifying structural impacts of migration and forward-

looking policy

Background


1. To investigate to what extent migration & remittances improve asset

accumulation in the source communities

2. To examine whether migration & remittances has impact on structural

poverty transitions of rural households

3. To identify channels though which migration & remittances can

potentially influence welfare dynamics of rural households

Objectives


Conceptual framework


Income is the product of households’ asset endowments & the returns to

capital (Barrett,2005) (1) itititritKitY it ]['

Y : income of household i in time t itK : a vector of household capital.

r : expected returns : an exogenous shocks

: transitory unearned income : the measurement error

Period specific income (structural income)

(2) )('][ itritKitYE



Total differentiation of the income equation (1)

(3) itddditdritKitritdKitdY ititit )][(']['

Taking the expectation of equation (3)

(4) itdritKitritdKitdYE ''][ : the structural income growth

Channels

1. Remittances: increase factor productivity

(5) ),,( vtGitKIfitr



2. Remittances: strengthen endowment effect

Asset growth can be expressed as a reduced form function

(6) ),,,,,,.( ,,

ititvtvtititititit ddGGdIIdKKfdY

Hypotheses

Remittances lead to greater asset growth for initially wealthy households,

,0/ itit dIdY

Remittances can result in a lower asset growth for poor households, 0/ itit dIdY .

Remittances impact welfare dynamics though its effect on factor productivity

Panel survey to assess vulnerability to poverty in

Asia

3 provinces in Vietnam (220 villages & 2200

households )

3 provinces in Thailand (220 villages & 2200

households )

2007, 2008 & 2010 of household & village level

surveys.

Across all three rounds, 2108 & 2095 households

appear in all rounds in Vietnam & Thailand,

Data description

9Background Objectives Conceptual framework Data Econometric Approach Results Conclusions

1. Constructing asset indexitiptvtgkj iktijtjkj ijtjit GAAAL ,1 ))(()()6(

where livelihood L defined as household i income per capita divided by the nationally

defined poverty line tP in period t

The Econometric approach


2. Asset growth equation (7a) ivtititititit XZAMA 154131211 .

(7b) ivtititititit XZAIA 154131211

where itA refers to growth in asset; 1itM refer to migration decision; 1itI log of remittances

1itZ are a vector of household characteristics : it referees income and asset severity of shocks

1vtX are vectors of geographic location and natural variables

2. Asset growth equation



1. Compare asset growth between non-migrant and migrant households in the

community of origin as specified in equ. (7a).

2. Investigate the impact of remittances in explaining rural households’ asset

accumulation path equ. (7b).

3. Estimate both equ. (7a) & (7b) to test whether migration & remittances

impact the structurally poor households differently than non-poor ones.



3. Decomposition Analysis

Blinder–Oaxaca decomposition is employed to identify channels though

which migration & remittances can affect welfare dynamics

U

N

o

M

o

C

N

j

M

j

N

j

E

N

j

M

j

M

j

NM XXXGG )()()()8(

E : growth differences due to migrant households having lower endowments

C : growth differences due to migrant households having lower productivity

(marginal returns).

U : the growth differences unexplained by endowments or productivity

Results & discussions


For Vietnam

Year 2007 2008 2010 Average

Migrant households (%) 39 37 39 38

Number of migrant 3.28(2.29) 2.99(2.08) 3.1(2.15) 3.13(2.18)

Annual income from remit. 312(562) 481(629) 567(963) 453(732)

For Thailand

Migrant households (%) 45 44 47 45

Number of migrant (%) 4.31(2.56)

4.35(2.65) 4.33(2.79) 4.34(2.67)

Annual income from remit. 974(460) 1006(500) 1268(762) 1086(583)

Migrant households, income from remittance & number of migrants



Descriptive statistics of households by migration status in Vietnam &Thailand

Vietnam Thailand

Migrant

(38)

Non-

migrant (62)

Difference

Test

Migrant

(45)

Non-migrant

(55)

Difference

Test

Monthly structural inc. 127(80) 115(84) *** 165(375 172(133)

Structural poor (%) 14 19 *** 18 15 **

HHsize 4.46(1.76) 4.33(1.76) 4.12(1.77) 3.97(1.71) ***

Children 0.19(0.19) 0.28(0.22) *** 0.19(0.16) 0.21(0.18) ***

Elderly 0.07(0.17) 0.12(0.25) *** 0.07(0.13) 0.11(0.22) ***

Mean edu. 8.81(3.04) 7.27(3.51) *** 6.45(2.42) 5.90(2.45) ***

Gender (%) 78 76 * 72 73

Ethnic (%) 86 75 *** - -

Membership(%) 91 85 *** 15 15


15Background Objectives Conceptual framework Data Econometric Approach Results Conclusions Background Objectives Conceptual framework Data Econometric Approach Results Conclusions

The Impact of Migration on Asset Growth by Welfare Status Vietnam

Variables All sample Structural poor Structural non-poor

Migrant household 0.020(0.015) 0.048(0.060) 0.007(0.014)

Household characteristics Yes Yes Yes

Village characteristics Yes Yes Yes

Severity of shocks Yes Yes Yes

Thailand


Migrant household -0.042**(0.018) -0.080**(0.037) -0.028(0.018)

Household characteristics Yes Yes Yes

Village characteristics Yes Yes Yes

Severity of shocks Yes Yes Yes

The Impact of Remittances on Asset Growth by Welfare Status in Vietnam




Remittances 0.024***(0.006) 0.081***(0.031) 0.007(0.007)

Initial assets & household characteristics Initial asset index -0.502***(0.022) -0.761***(0.051) -0.505***(0.024)HH size -0.152***(0.020) -0.557***(0.114) -0.117***(0.017)Gender 0.038**(0.019) 0.029(0.076) 0.037**(0.016)Ethnic 0.177***(0.023) 0.146**(0.074) 0.168***(0.023)Membership 0.077***(0.020) 0.119**(0.057) 0.064***(0.022)Village level geographic location &natural conditions Mountainous -0.018**(0.005) -0.052***(0.027) -0.035**(0.014)Paved road 0.104***(0.014) 0.095*(0.056) 0.113***(0.014)Violence -0.058**(0.023) -0.120(0.075) -0.039(0.024)Epidemics -0.062**(0.024) -0.079(0.068) -0.065**(0.026)Public water supply 0.064***(0.015) 0.012(0.063) 0.080***(0.015)HHs electricity 0.000(0.000) 0.001(0.001) -0.000(0.001)No. of enterprises 0.001(0.003) 0.219(0.439) 0.001(0.003)HHs sanitation -0.000(0.000) 0.004**(0.002) -0.001***(0.000)Time to the market -0.001**(0.000) -0.001(0.001) -0.001***(0.000)Severity of shocks Asset loss -0.077***(0.026) -0.193**(0.077) -0.049***(0.017)Income loss -0.000(0.000) -0.001(0.002) -0.000(0.000)




Remittances -0.013**(0.005) -0.030**(0.014) -0.009(0.006)

Initial assets &household characteristics Initial asset index -0.562***(0.019) -0.920***(0.036) -0.670***(0.023)HH size -0.179***(0.021) -0.421***(0.060) -0.132***(0.028)Gender -0.170***(0.016) -0.403***(0.071) -0.201***(0.021)Membership 0.080***(0.022) 0.140**(0.064) 0.056**(0.024)Village level geographic location &natural conditions

Paved road 0.039*(0.020) 0.116**(0.048) 0.026(0.031)Violence -0.065***(0.020) -0.060(0.047) -0.093***(0.036)Epidemics -0.017**(0.012) -0.027(0.050) -0.040(0.037)Public water supply 0.018**(0.011) -0.056(0.050) 0.043(0.034)HHs electricity 0.000(0.002) -0.010*(0.006) 0.003(0.004)No. of enterprises 0.018(0.011) 0.031(0.028) 0.001(0.019)HHs sanitation 0.001***(0.000) 0.000(0.000) 0.001***(0.000)Time to the market -0.001(0.001) 0.000(0.001) -0.002*(0.001)Severity of shocks Asset loss -0.019***(0.002) -0.046(0.122) -0.017***(0.002)Income loss -0.003**(0.001) -0.001(0.001) -0.004*(0.002)

The Impact of Remittances on Asset Growth by Welfare Status in Thailand

Blinder–Oaxaca decomposition of growth difference by remittance status (%)



Vietnam Thailand

Endowments Coefficients Total Endowments Coefficients Total

Human & social capital -0.42 22.57 19.43 0.80 -42.26 -41.46

Natural & physical capital 0.74 40.93 41.67 -1.25 9.85 8.60

Geographic & locational variables 1.93 -7.26 -5.33 1.49 21.15 22.64

Total 2.25 56.24 58.49 1.03 -11.26 -10.23

Summary of decomposition results

Total growth differential (E + C + U) 9.21 -7.25

Endowment & structural effect (C + E) 58.49 10.23

Unexplained effect (U) -40 -2.98

Coefficients as of attributable difference [C/(C + E)] 96 110.12

For Vietnam

Remittances (not migration) has significant impact in explaining asset

accumulation overtime

Structural poor migrant households with remittances experience higher

growth in asset

Remittances increase rural wellbeing by increasing productivity and

endowment effect to some extent

Shocks, limited accessibility of infrastructure facilities & ethnicity hinder

asset accumulation overtime



For Thailand

Migration & remittances hinder rural households to accumulate assets &

escape from poverty

Migration & remittances decrease asset accumulation for structural poor

households,

It offsets the tendency of poor households to climb out of poverty

& catch-up to their better-off neighbors.

Shocks, limited accessibility of infrastructure facilities & gender offset

the tendency toward convergence

20Background Objectives Conceptual framework Data Econometric Approach Conclusions


1. Poor households are more likely to migrate & receive remittances, but

tend to have low quality and return employment

2. Rapid & continuing out-migration of younger household members

increase labor constraints

3. Households receiving remittances tend to be structurally poor

households because they spend remittances for consumption purpose

Conclusions


Policy recommendations

1. Migration & remittances increase productivity.

2. However, not all migration decisions lead to the expected success

3. High rates out-migration of young households members can result in

i. a decline in production & productivity in rural areas,

ii. bad employment in urban areas

Inequality in rural areas may continue growing

Conclusions


Thank you for your attention

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Variable Per capita inc. Annual per capita income (US$ PPP at 2005 prices) 1428.68

(861.35)Household & social capital HH-size Total household size 4.38(1.76)Children Proportion of children in household less than 15 0.24(0.22)Elderly Proportion of elderly in household above 60 0.10(0.23)Age Age of the household head 47.40(15.64)Mean edu. Average years of schooling of adult members 7.86(3.42)Primary Proportion of adult completed primary school 0.26(0.24)High school Proportion of adult completed high school 0.20(0.22)Professional Proportion of adult completed professional education 0.55(0.27)Gender Gender of the head (male headed =1, female headed =0) 0.77Ethnic Major ethnic Kinh & Hoa (=1), others(=0) 0.79Membership Any household member involved in political or social organization

(yes=1, no=0)0.87

Off-farm Participated in off-farm activities (yes=1, no=0) 0.52Self emp. Own small & medium scale enterprise (yes=1, no=0) 0.25

Description & Summary Statistics of Panel Variables (N = 6318)

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Description & Summary Statistics of Panel Variables (N = 6318)Physical & natural capital measured in US$ PPP at 2005 prices in hundreds Agric. tools Value of agricultural tools owned 4.08(10.37)Transp. tools Value of transportation tools owned 10.70(29.54)L& Land size owned, in hectares 0.78(1.12)Livestock Value of livestock owned 8.11(25.88)Own house Value of house owned 102.22(158.17)House utilities Value of house utilities owned 10.08(19.66)Asset shock severity Low Experienced less sever (yes=1, no=1) 0.01Medium Experienced medium sever (yes=1, no=1) 0.09Highly Experienced highly sever (yes=1, no=1) 0.27Income shock severity Low Households experienced less sever (yes=1, no=0) 0.17Medium Households experienced medium sever (yes=1, no=0) 0.17Highly Households experienced highly sever (yes=1, no=0) 0.47

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Description & Summary Statistics of Panel Variables (N = 6318)

Coping measures in responses to shocks Forest extrac. Depend on forest extraction (yes=1, no=0) 0.14Diversify agric. Diversifying agricultural profile (yes=1, no=0) 0.06Drawing assets Drawing drawn assets (yes=1, no=0) 0.13Lending informal Lent money from informal (yes=1, no=0) 0.17Public transfer Participated in public transfer (yes=1, no=0) 0.12Reduce cons. Reduced consumption (number of meals) (yes=1, no=0) 0.67Geographical capital at village level Paved road The village has paved road (yes=1, no=0) 0.55Mountainous The village is located in mountainous (yes=1, no=0) 0.48Main transp. Main transportation of the village is bus or motorcycle (yes=1,

no=0)0.58

Violence The village experienced violence (yes=1, no=0) 0.17Epidemics The village experienced epidemics (yes=1, no=0) 0.11Water supply The proportion of households with public water supply in the village 0.23Irrigated Total irrigated land in the village 13.01(24.21)No. of enterp. Number of enterprises who have more than 9 employees 0.17(1.64)HHs elect. The proportion of households with electricity in the village 92.31(22.65)HHs sanit. The proportion of households with sanitation in the village 18.20(31.53)Time to market Time to reach nearest market in minute 22.57(24.37)Time to bank Time to nearest bank market in minute 35.69(31.19)

20082007 Poor Non-poorPoor Twice poor 14 Rising from poverty 14 Stochastically poor 57 Stochastically mobile 65 Structurally poor 43 Structurally mobile 35Non-poor Declining into poverty 5 Twice nonpoor 67 Stochastically mobile 76 Structurally nonpoor 100 Structurally mobile 24 2010 2008 Poor Non-poorPoor Twice poor 10 Rising from poverty 9 Stochastically poor 55 Stochastically mobile 75 Structurally poor 45 Structurally mobile 25Non-poor Declining into poverty 7 Twice nonpoor 74 Stochastically mobile 50 Structurally nonpoor 100 Structurally mobile 50

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Vietnam Thailand Migrant (38) Non-migrant

(62)Difference

TestMigrant (45) Non-migrant

(55)Difference

TestMonthly structural income 127(80) 115(84) *** 165(375 172(133) HHsize 4.46(1.76) 4.33(1.76) *** 4.12 (1.77) 3.97(1.71) ***Children 0.19(0.19) 0.28(0.22) *** 0.19(0.16) 0.21(0.18) ***Elderly 0.07(0.17) 0.12(0.25) *** 0.07(0.13) 0.11(0.22) ***Mean edu. 8.81(3.04) 7.27(3.51) *** 6.45(2.42) 5.90(2.45) ***Gender 0.78 0.76 * 0.72 0.73 Ethnic 0.86 0.75 *** - - Membership 0.91 0.85 *** 0.15 0.15



Structural income & poverty by migration status

2007 2010 Change

t-test

Annual

growth

2007 2010 Change t-

test

Annual

growth

Migrant Non-migrant

For Vietnam

Annual structural

income per capita

1332 1692 360*** 7.0% 1248 1476 228*** 5.0%

Structural poor 0.19 0.09 -0.10*** 2.5% 0.24 0.15 -0.09*** 2.3%

For Thailand

Annual structural

income per capita

1568 2127 559*** 9.0% 1541 2305 764*** 12.0***

Structural poor 0.20 0.14 -0.06** 1.5% 0.19 0.11 -0.08*** 2.0%

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Arnoldshain Seminar XI “Migration, Development, & Demographic Change –

Documents