Human Capital and Foreign Remittances in Pakistan

Abstract

This study analyzes the effects of foreign remittance on human capital by using the pooled data collected from HIES data sets, from 1998/99 to 2018/19. Two proxies (e.g., 1- mean years-of-schooling with age equal to 15 years and above, 2- mean years-of-schooling with age equal to 25 and above) are used for human capital. The panel data techniques, like Fixed effect,Random effect model, GLS regression, and Panel corrected standard error regression, are used. The results show a significant positive relationship between human capital measured in terms of both proxies and foreign remittances in overall Pakistan, but human capital in terms of the first proxy has a statistically significant association with foreign remittances in an urban and rural area, in terms of the second proxy, significant in urban, but not in rural areas. Per-capita-income has statistically significant positive effects on human capital in terms of both proxies in rural areas but does not have a significant effect in urban areas. It is recommended that the Government should formulate policies that can maximize the inflow of foreign remittances in Pakistan.