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 3 Background 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 4 Background Objectives Conceptual framework Data Econometric approach Results Conclusions

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 5 Background Objectives Conceptual framework Data Econometric approach Results Conclusions

Conceptual framework 6 Background Objectives Conceptual framework Data Econometric approach Results Conclusions  Income is the product of households’ asset endowments & the returns to capital (Barrett,2005)

Conceptual framework 7 Background Objectives Conceptual framework Data Econometric approach Results Conclusions

Conceptual framework 8 Background Objectives Conceptual framework Data Econometric approach Results Conclusions  Hypotheses

 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 9 Background Objectives Conceptual framework Data Econometric Approach Results Conclusions

1. Constructing asset index The Econometric approach 10 Background Objectives Conceptual framework Data Econometric approach Results Conclusions 2. Asset growth equation

The Econometric approach 11 Background Objectives Conceptual framework Data Econometric approach Results Conclusions

The Econometric approach 12 Background Objectives Conceptual framework Data Econometric approach Results Conclusions

Results & discussions 13 Background Objectives Conceptual framework Data Econometric Approach Results Conclusions For Vietnam Year Average Migrant households (%) Number of migrant3.28(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 (%) 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

Results & discussions 14 Background Objectives Conceptual framework Data Econometric Approach Results Conclusions Descriptive statistics of households by migration status in Vietnam &Thailand VietnamThailand Migrant (38) Non- migrant (62) Difference Test Migrant (45) Non-migrant (55) Difference Test Monthly structural inc.127(80)115(84)***165(375172(133) Structural poor (%)1419***1815** HHsize4.46(1.76)4.33(1.76)4.12(1.77)3.97(1.71)*** Children0.19(0.19)0.28(0.22)***0.19(0.16)0.21(0.18)*** Elderly0.07(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 (%)7876*7273 Ethnic (%)8675***-- Membership(%)9185***15

Results & discussions 15 Background Objectives Conceptual framework Data Econometric Approach Results Conclusions The Impact of Migration on Asset Growth by Welfare Status Vietnam VariablesAll sampleStructural poorStructural non-poor Migrant household0.020(0.015)0.048(0.060)0.007(0.014) Household characteristicsYes Village characteristicsYes Severity of shocksYes Thailand VariablesAll sampleStructural poorStructural non-poor Migrant household **(0.018)-0.080**(0.037)-0.028(0.018) Household characteristicsYes Village characteristicsYes Severity of shocksYes

The Impact of Remittances on Asset Growth by Welfare Status in Vietnam Results & discussions 16 Background Objectives Conceptual framework Data Econometric Approach Results Conclusions VariablesAll sampleStructural poorStructural non-poor 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) Gender0.038**(0.019)0.029(0.076)0.037**(0.016) Ethnic0.177***(0.023)0.146**(0.074)0.168***(0.023) Membership0.077***(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 road0.104***(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 supply0.064***(0.015)0.012(0.063)0.080***(0.015) HHs electricity0.000(0.000)0.001(0.001)-0.000(0.001) No. of enterprises0.001(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)

Results & discussions 17 Background Objectives Conceptual framework Data Econometric Approach Results Conclusions VariablesAll sampleStructural poorStructural non-poor Remittances **(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) Membership0.080***(0.022)0.140**(0.064)0.056**(0.024) Village level geographic location &natural conditions Paved road0.039*(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 supply0.018**(0.011)-0.056(0.050)0.043(0.034) HHs electricity0.000(0.002)-0.010*(0.006)0.003(0.004) No. of enterprises0.018(0.011)0.031(0.028)0.001(0.019) HHs sanitation0.001***(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 (%) Results & discussions 18 Background Objectives Conceptual framework Data Econometric Approach Results Conclusions VietnamThailand EndowmentsCoefficientsTotalEndowmentsCoefficientsTotal Human & social capital Natural & physical capital Geographic & locational variables Total Summary of decomposition results Total growth differential (E + C + U) Endowment & structural effect (C + E) Unexplained effect (U) Coefficients as of attributable difference [C/(C + E)]

 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 19 Background Objectives Conceptual framework Data Econometric Approach Results Conclusions Results & discussions

 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 20 Background Objectives Conceptual framework Data Econometric Approach Conclusions Results & discussions

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 21 Background Objectives Conceptual framework Data Econometric Approach 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 22 Background Objectives Conceptual framework Data Econometric Approach Conclusions

Thank you for your attention 23

24 Variable Per capita inc.Annual per capita income (US$ PPP at 2005 prices) (861.35) Household & social capital HH-sizeTotal household size4.38(1.76) ChildrenProportion of children in household less than (0.22) ElderlyProportion of elderly in household above (0.23) AgeAge of the household head47.40(15.64) Mean edu.Average years of schooling of adult members7.86(3.42) PrimaryProportion of adult completed primary school0.26(0.24) High schoolProportion of adult completed high school0.20(0.22) ProfessionalProportion of adult completed professional education0.55(0.27) GenderGender of the head (male headed =1, female headed =0)0.77 EthnicMajor ethnic Kinh & Hoa (=1), others(=0)0.79 Membership Any household member involved in political or social organization (yes=1, no=0) 0.87 Off-farmParticipated in off-farm activities (yes=1, no=0)0.52 Self emp.Own small & medium scale enterprise (yes=1, no=0)0.25 Description & Summary Statistics of Panel Variables (N = 6318)

25 Description & Summary Statistics of Panel Variables (N = 6318) Physical & natural capital measured in US$ PPP at 2005 prices in hundreds Agric. toolsValue of agricultural tools owned4.08(10.37) Transp. toolsValue of transportation tools owned10.70(29.54) L&Land size owned, in hectares0.78(1.12) LivestockValue of livestock owned8.11(25.88) Own houseValue of house owned102.22(158.17) House utilitiesValue of house utilities owned10.08(19.66) Asset shock severity LowExperienced less sever (yes=1, no=1)0.01 MediumExperienced medium sever (yes=1, no=1)0.09 HighlyExperienced highly sever (yes=1, no=1)0.27 Income shock severity LowHouseholds experienced less sever (yes=1, no=0)0.17 MediumHouseholds experienced medium sever (yes=1, no=0)0.17 HighlyHouseholds experienced highly sever (yes=1, no=0)0.47

26 Description & Summary Statistics of Panel Variables (N = 6318) Coping measures in responses to shocks Forest extrac.Depend on forest extraction (yes=1, no=0)0.14 Diversify agric.Diversifying agricultural profile (yes=1, no=0)0.06 Drawing assetsDrawing drawn assets (yes=1, no=0)0.13 Lending informalLent money from informal (yes=1, no=0)0.17 Public transferParticipated in public transfer (yes=1, no=0)0.12 Reduce cons.Reduced consumption (number of meals) (yes=1, no=0)0.67 Geographical capital at village level Paved roadThe village has paved road (yes=1, no=0)0.55 MountainousThe village is located in mountainous (yes=1, no=0)0.48 Main transp.Main transportation of the village is bus or motorcycle (yes=1, no=0)0.58 ViolenceThe village experienced violence (yes=1, no=0)0.17 EpidemicsThe village experienced epidemics (yes=1, no=0)0.11 Water supplyThe proportion of households with public water supply in the village0.23 IrrigatedTotal irrigated land in the village13.01(24.21) No. of enterp.Number of enterprises who have more than 9 employees0.17(1.64) HHs elect.The proportion of households with electricity in the village92.31(22.65) HHs sanit.The proportion of households with sanitation in the village18.20(31.53) Time to marketTime to reach nearest market in minute22.57(24.37) Time to bankTime to nearest bank market in minute35.69(31.19)

PoorNon-poor PoorTwice poor14Rising from poverty14 Stochastically poor57Stochastically mobile65 Structurally poor43Structurally mobile35 Non-poorDeclining into poverty5Twice nonpoor67 Stochastically mobile76Structurally nonpoor100 Structurally mobile PoorNon-poor PoorTwice poor10Rising from poverty9 Stochastically poor55Stochastically mobile75 Structurally poor45Structurally mobile25 Non-poorDeclining into poverty7Twice nonpoor74 Stochastically mobile50Structurally nonpoor100 Structurally mobile50 27

28 VietnamThailand Migrant (38) Non-migrant (62) Difference Test Migrant (45) Non-migrant (55) Difference Test Monthly structural income127(80)115(84)***165(375172(133) HHsize4.46(1.76)4.33(1.76)***4.12 (1.77)3.97(1.71)*** Children0.19(0.19)0.28(0.22)***0.19(0.16)0.21(0.18)*** Elderly0.07(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 * Ethnic ***-- Membership ***0.15

Results & discussions 29 Background Objectives Conceptual framework Data Econometric Approach Results Conclusions Structural income & poverty by migration status Change t-test Annual growth Change t- test Annual growth Migrant Non-migrant For Vietnam Annual structural income per capita ***7.0% ***5.0% Structural poor ***2.5% ***2.3% For Thailand Annual structural income per capita ***9.0% ***12.0*** Structural poor **1.5% ***2.0%