The effect of international remittances on labour supply in Jordan: an empirical investigation

Purpose - The purpose of the current study is to examine the effect of international remittances on the labour market participation of women and men left behind in Jordan. The study particularly focuses on the labour supply side for both women and men. Design/methodology/approach - The study draws on micro-data from the Jordan Labour Market Panel Survey (JLMPS) in 2010, a nationally representative survey, and addresses the endogeneity of receiving remittances through an Instrumental Variable (IV) approach. Findings - The empirical results indicate that remittances are found to have a negative and significant impact on labour supply of both women and men. On average, women who live in remittance receiving household are about 5% points less likely to perform any market work, 3% points less likely to be in wage employment and about 8% points less likely to be engaged in own work. While, men who live in remittance receiving household are about 25% points less likely to perform any market work, 5% points less likely to be in wage employment and about 10% points less likely to be engaged in own work. When the author instruments for remittance receipt of the household, the effect of remittances on likelihood to work is found larger for both women and men. Originality/value - Workers' remittances are considered as one of the vital financial sources for many households in labour exporting countries, most of the investigation on the effects of such financial flows concentrate on the macroeconomic effects. It is therefore important to conduct empirical investigation to fairly and accurately evaluate the impact of these flows on the Jordanian labour market at a microeconomic level.