Labor supply in response to remittance income: the case of Mexico
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The growth in the flow of international remittance income in many developing countries has increased attention towards remittances as a development mechanism. This study attempts to understand to what degree labor patterns are affected by the receipt of remittances. Using nationally representative household income and expenditure data for Mexico, I analyze the effect of remittance income on labor supply decisions. I find that household labor supply in response to remittance income is consistent with findings which measure labor supply behavior in the presence of other forms of unearned income in different settings. That is, remittance receipts are associated with fewer hours of work and income elasticities are estimated in the range of -.006 to -.03. This finding attenuates to some degree the measure of the impact of remittances in the receiving country’s aggregate output.
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