Remittances and welfare in Tajikistan

Abstract: In many developing countries, migration and remittances have become an important option for households facing poverty, unemployment and lack of opportunities. This raises the question of how effective this strategy is in improving welfare in countries sending migrants abroad and receiving remittances back. Of particular interest is the case of countries that have become highly dependent on the remittance income. Among them, Tajikistan registered the highest percentage of received remittances on the Gross Domestic Product in 2009, about 35%. This paper thus focuses on the evaluation of the remittance effect on three welfare indicators for Tajikistan in 2007: poverty, inequality, and schooling. This is done by estimating a contrafactual consumption aggregate for households in the hypothetical case they stop receiving remittances and re-calculating the poverty and inequality indicators. The effect of remittances on schooling is evaluated by estimating how receiving remittances in the household affect the probability of a child to be enrolled at school. The results point to a positive relationship between remittances and poverty reduction, but also a relationship with an increase in inequality. Remittances are found to be related to an increase in the likelihood of children aged 7 to 15 years to be enrolled at school, with a stronger effect for girls.