Does remittances enhances household's living standard? Evidence from pre‐ and post‐Gulf crisis

• Published date: 01 May 2022
• Author: Syed Rahim,Shahid Ali,Salman Wahab
• Date: 01 May 2022
• DOI: http://doi.org/10.1002/pa.2442

ACADEMIC PAPER

Does remittances enhances household's living standard?

Evidence from pre- and post-Gulf crisis

Syed Rahim

1

| Shahid Ali

2

| Salman Wahab

3

1

Pakistan Institute of Development

Economics, Islamabad, Pakistan

2

University of Swat, Mingora, Pakistan

3

Qingdao University, Qingdao, China

Correspondence

Salman Wahab, Qingdao University, Qingdao,

Shandong, China.

Email: maanwahab94@gmail.com,salman@

qdu.edu.cn

To explore “The effects of remittances on households’standard of living and analyze

the pre- and post-Gulf crisis”for district Swat. The primary data is collected from

68 sample respondents through face-to-face interviews. The data is analyzed, and

descriptive statistics are calculated for the selected variables, which are consumption,

education, poverty, health, and socioeconomic status, that all represent the living

standard of the household. A comparative analysis based on descriptive statistics was

used to uncover the pre- and post-Gulf crisis conditions of the families who are

remittances recipients. The findings of this study reveal that remittances positively

effect and encourage consumption, education, health as well as socioeconomic sta-

tus. Remittances play a vital role in poverty alleviation. But, after the Gulf crisis, the

flow of remittances declined, which negatively affect all the variables, except poverty

which were improved for households. This study recommends the affordable avail-

ability of formal channels for remittances transferring. Additionally, the Gulf crisis-

effected migrants and their families have to be subsidized to encourage and keep

them above the poverty line and lessen brain-drain.

1|INTRODUCTION

The world is a global village; migration is one of the components of

globalization. People often migrate to other countries for various pur-

poses; among others, the majority of people migrate to earn income.

Moreover, unemployment may also be a significant factor behind this.

Some other reasons behind migration include losing a job or an eco-

nomic downturn, less payment of credit hours. Some of these

migrants are migrated because of human rights violations, discrimina-

tion, and exploitation. The number of international migrants is increas-

ing every year. Currently, it was projected that in 2019, there were

272.6 million international migrants worldwide (United Nations-

Department of Economic and Social Affairs [UN-DESA], 2019), which

approximately equals to 3.5% of the global population. These migra-

tions sometimes remain very beneficial for the migrants and their fam-

ilies left behind in the shape of remittances. Remittances received by

households’act as additional income, which improves the living stan-

dard and social status of their family. For this reason, many of the

workers seek employment outside their countries to improve their

financial conditions. Because of migration, the amount of remittances

has been raised globally from $126 in 2000 to $689 billion in 2018,

which is a 9% increase to the amount of 2017 (i.e., $633 billion). The

increase in international migration raised the remittances in all regions

of the world, which also includes lower- and middle-income countries

(LMICs). The flow of remittances to LMICs increased by an estimated

8.5% in 2017 and reached $466 billion. However, the growth rate of

remittances was estimated at 4.1% in 2018 and reached $485 billion

for LMICs.

Remittances, whic h are also known as “Migr a-Dollars,”plays a

crucial role in the livelihood of the left behind migrant's family.

Households use the income earned by migrants for the betterment

of their living standards and other motives. As the migrants

employed, their income started. After the deduction of taxes and

personal expenses, they send the remaining income to their home

countries, which we simply called remi ttances. Remittan ces are

playing a signific ant role in developing countries. Not only at the

micro-level but als o on the macro-level, such as remittan ces are very

important for pover ty alleviation (Mitr ovi

c & Jovicˇi

c, 2006). Remit-

tances also contribute to the development and growth of a country

(Page & Plaza, 2006).

Received: 9 August 2020 Revised: 17 August 2020 Accepted: 22 August 2020

DOI: 10.1002/pa.2442

J Public Affairs. 2022;22:e2442. wileyonlinelibrary.com/journal/pa © 2020 John Wiley & Sons Ltd 1of11

https://doi.org/10.1002/pa.2442