Development impacts of migration and remittances on migrant-sending communities: Evidence from Ethiopia

This paper evaluates the development impacts of migration and remittances in migrant source communities by applying insights from the New Economics of Labor Migration (NELM) theory to Ethiopia’s migration. Using household survey data, we empirically evaluate how household participation in migration arises and so that the subsequent labor losses and the influx of remittances affect income sources and asset accumulation of smallholder farm households. To account several econometric issues and consistently estimate the impacts of migration and remittances, we adopted three-stage least-squares method complemented with endogeneity and multicollinearity test. Besides, using logistic and multinomial logistic regressions respectively, we estimate the determinants of the household migration decision to have migrants, as well as the probability of the household to send out temporary or permanent migrants. Findings suggest that larger and wealthier households are less likely to have migrant family members, while households living below the poverty line, as well as villages with the highest unemployment rate, are the most likely to have both temporary and permanent migrants. However, a rise in months spent out of agriculture has a significant negative effect on crop income and asset accumulation, but only for permanent migration. By contrast, the influx of remitted income from migrants has led to increased crop income and asset values in the form of land and livestock holdings. Finally, this manuscript provides more comprehensive evidence by showing the net-returns of migration in terms of initial lost-labor effects and the positive developmental impacts that it produces varied for households with different types of migration and production conditions.